Oil Prices Soar Amid Cold Snap, War Worry

Jan. 25 -- Homeowners everywhere have reason to worry this winter, with heating oil prices up 30 percent in two months, gas up to $1.45 at the pump, and U.S. crude oil inventories at their lowest levels in a quarter-century.

It could get worse.

According to some analysts, there is a "perfect storm" brewing in oil prices because of three major factors coming together.

To the South

The 50-day Venezuela oil strike, which aims to drive out President Hugo Chavez, has all but cut off the oil flow that normally provides 14 percent of what the United States uses.

Chavez is trying to get his troops to take over oil production, but it seems not to be working. According to the latest shipping data, despite two weeks of raised production, exports have reached only 688,000 barrels per day, a quarter of the normal levels.

According to Chavez's opposition, 90 percent of the country's oil refining remains closed.

On the Home Front

The coldest weather in seven years in many parts of the county has raised heating oil demands and costs.

According to a survey by the Energy Department's Energy Information Administration, the price U.S. consumers paid for home heating oil increased for the ninth week in a row, reaching it highest level in almost two years. The latest heating oil price of $1.453 a gallon is up 29 cents from a year ago, and the highest since the third week of February 2001.

For many households this winter, the latest deep freeze will help add a $600 to $700 cost to keep pipes from freezing and will drain U.S. oil supplies even further.

To the East

A looming war with Iraq raises concerns that the world could lose up to 2 million barrels of the world's 40 million barrels per day of crude oil.

A Pentagon official told Reuters news service that any U.S. war on Iraq would try to protect oil facilities and keep export stoppages to a minimum, but others have said both oil storage facilities and refineries could become military targets.

And, there is always the fear that Saddam Hussein could torch his own oil fields if we go to war. Memories of how Saddam set Kuwait's oil wells afire when retreating from the 1991 Gulf War may only make investors in the world oil market more nervous.