‘Fiscal cliff’ averted, oil prices see spike
NEW YORK (AP) – The price of oil jumped on Wednesday, as traders cheered a deal in Washington to avert the “fiscal cliff,” the series of tax increases and spending cuts that could have pushed the world’s biggest economy into recession.
The House voted near midnight to send the bill to President Barack Obama after a frantic day of political brinksmanship on Capitol Hill.
In morning trading benchmark crude for February delivery rose $1.14 to $92.96 a barrel on the New York Mercantile Exchange. Oil followed the stock market higher, where major indexes were up about 2 percent.
Economists had warned that if Congress did not take action, a series of tax increases and spending cuts due to automatically start this year could have pushed the U.S. into recession. A spike in unemployment and less consumer spending would likely depress energy demand.
Some House Republicans at first opposed the bill, which drops middle-class tax increases and $24 billion in spending cuts set to take effect over the next two months, while raising taxes on the wealthy. They called for more spending cuts but eventually agreed to a simple yes-or-no vote on the bill, which had already passed the Senate by a wide margin.
But the nation’s budget problems are far from over. There are still many more hurdles to cross, including a new deadline for spending cuts in two months. Oil analyst Phil Flynn says in the meantime, “ignorance is bliss and this deal should propel oil...near $96 a barrel.”