Oil closes above $80 per barrel for first time

— -- Oil closed above $80 a barrel for the first time in history Thursday, setting a record for a third-consecutive day as supply worries and refinery shutdowns lifted prices.

The price of a barrel of light, sweet crude for delivery in October rose 18 cents to $80.09. That's up 12% from a month ago and 25% higher than a year ago.

Oil futures fell for the first time in 10 sessions Friday. Light, sweet crude for October delivery fell 99 cents to settle at $79.10 a barrel on the New York Mercantile Exchange after rising earlier to $80.36, an intraday record.

Despite the gains, oil is still not at a record when adjusted for inflation. In January 1981, the average oil price was $92.91 in today's dollars, according to the government.

Drivers will likely see little impact on gasoline from the increased oil prices because demand drops at the end of the summer driving season, putting less strain on supplies. That will help temper the effect of higher oil prices on consumers and the broad economy, which today is much less energy-dependent than it was a few decades ago.

"Unless oil (prices) spill into the price of gas, people aren't going to get too upset about it," says Todd Clark, a trader at Nollenberger Capital.

Stock investors have largely ignored the oil increases, driving up stocks. The Dow Jones industrial average rose 133.23 points, or 1%, to 13,424.88 Thursday.

Brightening news from the credit markets has been enough to overpower concerns about higher oil prices, Hugh Johnson of Johnson Illington Advisors says.

But the higher oil prices will still be felt throughout the economy. Heating oil prices may be higher this winter, airfares could creep up and shipping costs could rise, squeezing small businesses and truckers.

Such increases are coming when the economy is already in a somewhat fragile spot, with a volatile financial market, continued credit concerns from subprime mortgage defaults and some evidence of a slower job market.

"A lot of forces are coming together," says Timothy Rogers, chief economist at Briefing.com. "I don't think it's going to provide the force for a recession, but that's the fear."

Oil supplies tightening

Behind the latest oil increase:

•Supplies. U.S. oil inventories have fallen 9% in the past 10 weeks to the lowest level since mid-January, heightening supply worries.

The inventory decline, in part, has come as current, or spot, prices of oil have risen above prices for long-term contracts.

That makes it more lucrative for oil holders to sell rather than hold onto their oil.

Global demand has also been strong, particularly in China and India, where rapidly growing economies are requiring more fuel.

•Weather. Continued threats of hurricanes and other bad weather hitting the nation's oil industry are also propping up prices.

Hurricane Humberto crashed ashore in Texas and Louisiana on Thursday, dropping heavy rains that led to flooding and power outages. The storm prompted the closure of the Houston Ship Channel Wednesday, a major thoroughfare for petroleum imports.