Oil prices approached $40 a barrel, and gasoline and heating oil topped $1 a gallon yesterday in sometimes frenzied futures trading.
Traders scrambled to buy supplies after President Saddam Hussein of Iraq threatened Sunday to order attacks on oil fields in Saudi Arabia, other Arab countries and Israel unless a U.N. embargo against his country was lifted.
Crude for November delivery traded as high as $39.20 a barrel on the New York Mercantile Exchange before retreating in the afternoon to settle at $38.25, up $2.82 for the day.
It was one of the largest single-day increases in seven and a half years of trading on the exchange, and marked the ninth straight trading day that the November contract had risen, for a total rise of $8.38.
Increasingly hawkish statements by Iraqi leaders Thursday, Friday and Sunday have sent oil prices skyrocketing after about two weeks of relative stability and small daily increases.
Sunday's announcement particularly alarmed the many traders and brokers who had assumed that Iraq would go to war only if attacked, said Virginia Wiater, an energy futures broker for United Energy Inc., a New York brokerage. "That just made everybody completely cuckoo," she said.
In a further sign of price pressure, traders making informal oil deals after the close of trading on the mercantile exchange were agreeing to prices of about $39 a barrel, said Robert F. Murphy, an energy futures broker at Lehman Brothers Inc.
"Even without war, and without the destruction of the oil fields, we could reach $40" in trading today, he added.
Comparing current prices with those prevailing during the oil shocks of 1973 and 1979 is difficult because most oil was then shipped under long-term contracts rather than being traded on markets, and because prices in general have risen in the last decade.
The highest price paid for comparable oil was $39.80 on March 29, 1980, said Peter C. Beutel, an oil price analyst at Pegasus Econometric Group Inc., a consulting firm in Hoboken, N.J. Adjusted for inflation over the last 10 years, that is comparable to nearly $65 now.