The latest reports from the Commerce Department indicate that companies have cut back on orders for manufactured goods for the month of February. The price of oil spiked in mid-February has continued to rise 24 percent since. Elevated oil prices, the result of the on-going conflict in the Middle East, has many businesses preparing for the increased burden of high energy prices on profits. If businesses have already begun limiting spending and prices are expected to rise to as much as $5 per gallon by the summer, the recovery may be in jeopardy.
In more positive news, the Labor Department announced a decline in the number of people applying for unemployment benefits last week, indicating that employers may be building their workforces again after a long period of decline. Whether that trend will continue if energy prices continue to climb will remain to be seen in the coming weeks and especially months.
In the hours following the mixed announcement, prices for benchmark crude fluctuated. The contract for May delivery tacked on 21 cents to reach $105.96 per barrel in midday trading on the New York Mercantile Exchange.
Concern over oil production has continued to intensify this week with the no-fly zone over Libya and the rising tension in Yemen, which despite producing only 0.3 percent of the world’s oil, is a major transit hub for crude shipments in the Middle East. There is still a surplus of oil tapped and untapped globally but many investors doubt that oil producers, given the fighting in the Middle East and North Africa and the rising demand resultant of the Japanese nuclear crisis, will be able to meet the growing number of barrels needed to fuel the globe.
Analysts estimate that global demand for oil will increase by 1 to 2 million barrels per day in Japanese nuclear compensation alone. Some German nuclear facilities are expected to contribute to this number as they close for updates.