For the second day in a row, oil prices have dropped in New York. This seems to be in direct correlation with the death of Osama Bin Laden, which happened late Sunday night and was announced Monday morning.
Although the price has immediately decreased, economists and political advisors are cautioning any rejoice of an economic turn-around, due to the inevitable concerns of retaliation by terrorists.
Because of these concerns, the volatility of oil prices has increased dramatically since the terrorist leader was killed. Oil prices are estimated to rise and drop, becoming extremely unpredictable for the American economy and hindering its recovery.
Oil in New York yesterday decreased 2.7% – the most in two weeks – before rebounding 0.8%. Implied volatility for at-the- money options expiring in June, a measure of expected price swings in futures, and a gauge of options prices was 28% today, up from 26.2% a week before Osama’s death.
“The manufacturing sector in the U.S. has been the one area that has been fast recovering, so any signs that it might not be recovering as quickly as expected is going to dampen the outlook for growth,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne who forecast in an April 20 report that oil will average $113 in the third quarter. “There was some sort of terror premium factored into the oil price but, given the threat of reprisal, that hasn’t changed much.”
The rise in oil prices has affected almost every American home with gas prices reaching an average of $3.96 per gallon. The immediate decrease in oil prices is yet to have a determined effect on gas prices due to the previously mentioned concerns of reprisal.
