Oil prices jump after Bush, Congress reach agreement on economic stimulus plan

by John Wilen

Oil futures jumped more than $2 a barrel Thursday after the Bush administration and Congressional leaders agreed to an economic stimulus plan that will give most Americans tax rebates of $600 to $1,200, or even more if they have kids.

With Bernanke’s blessings and with the mainstream seeing demand already strong enough to be driving prices well above the Fed’s comfort zone, the response is no surprise. Gold shot up as well as other commodities, and the $ fell.

Prices were already higher after the government reported a drop in heating oil supplies and as investors anticipated a stimulus plan. But futures took off, posting their largest gains in over three weeks, on word that an agreement had been reached.

“What’s boosting us up today is a little economic optimism because people are going to get a little free money,” said Phil Flynn, an analyst at Alaron Trading Corp., in Chicago.

Yes, and a turnaround in housing probably is underway as well.

Light, sweet crude for March delivery rose $2.42 to settle at $89.41 a barrel on the New York Mercantile Exchange.

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The high prices may be having an impact on consumer behavior. Demand for gasoline fell last week by 152,000 barrels, though demand over the past four weeks _ which included the busy holiday travel period _ rose by 1.1 percent over the same period last year.

Real demand up for the month year over year.

Looking forward to see how a ‘nimble’ Fed responds.

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