Gasoline May Soon Cost a Sawbuck

Big New Shock at the Pump Forecast by Two Analysts


By DAN DORFMAN
April 28, 2008

Get ready for another economic shock of major proportions — a virtual doubling of prices at the gas pump to as much as $10 a gallon.

That's the message from a couple of analytical energy industry trackers, both of whom, based on the surging oil prices, see considerably more pain at the pump than most drivers realize.

Gasoline nationally is in an accelerated upswing, having jumped to $3.58 a gallon from $3.50 in just the past week. In some parts of the country, including New York City and the West Coast, gas is already sporting a price tag above $4 a gallon. There was a pray-in at a Chevron station in San Francisco on Friday led by a minister asking God for cheaper gas, and an Arco gas station in San Mateo, Calif., has already raised its price to a sky-high $4.62.

In Manhattan, at a Mobil gas station at York Avenue and East 61st Street, premium gas is now $4.03 a gallon. Two days ago, it was $3.96. Why such a high price? "Blame the people at STOPEC (he meant OPEC) and the oil companies," an attendant there told me.

These increases are taking place before the all-important summer driving season, signaling even higher prices ahead.

That's also the outlook of the Automobile Association of America. "As long as the price of crude oil stays above $100 a barrel, drivers will be forced to pay more and more at the gas pump," a AAA spokesman, Troy Green, said.

Oil recently hit an all-time high of nearly $120 a barrel, more than double its early 2007 price of about $50 a barrel. It closed Friday at $118.52.

The forecasts calling for a jump to between $7 and $10 a gallon are based on the view that the price of crude is on its way to $200 in two to three years.

Translating this price into dollars and cents at the gas pump, one of our forecasters, the chairman of Houston-based Dune Energy, Alan Gaines, sees gas rising to $7-$8 a gallon. The other, a commodities tracker at Weiss Research in Jupiter, Fla., Sean Brodrick, projects a range of $8 to $10 a gallon.

While $7-$10 a gallon would be ground-breaking in America, these prices would not be trendsetting internationally. For example, European drivers are already shelling out $9 a gallon (which includes a $2-a-gallon tax).

Canadians are also being hit with rising gas prices. They are paying the American-dollar equivalent of $4.92 a gallon, and they're being told to brace themselves for prices above $5.65 a gallon this summer.

Early last year, with a barrel of oil trading in the low $50s and gasoline nationally selling in a range of $2.30 to $2.50 a gallon, Mr. Gaines — in an impressive display of crystal ball gazing — accurately predicted oil was $100-bound and that gasoline would follow suit by reaching $4 a gallon.

His latest prediction of $200 oil is open to question, since it would undoubtedly create considerable global economic distress. Further, just about every energy expert I talk to cautions me to expect a sizable pullback in oil prices, maybe to between $50 and $70 a barrel, especially if there's a global economic slowdown.

While Mr. Gaines thinks there could be a temporary decline in the oil price, he's convinced an overall uptrend is unstoppable. In fact, he thinks his $200 forecast could be conservative, and that perhaps $250 could be reached. His reasoning: a combination of shrinking supply and increasing demand, especially from China, India, and America.

Mr. Brodrick's $200 oil forecast is largely predicated on a combination of pretty flat supply and rip-roaring demand. Other key catalysts include surging demand in China and India, where auto sales are booming, and major supply disruptions in Nigeria and also in Mexico, our second-largest source of oil imports, where oil production has fallen off a cliff.

More factors include the ever-present danger of additional supply disruptions from volatile countries in the Middle East that are not our allies, and the unwillingness of SUV-loving Americans to trim their unquenchable thirst for foreign oil. Likewise, for the first time, emerging markets this year will use more oil than America.

To Mr. Brodrick, it all adds up to an ongoing energy bull market. His favorite plays are the Energy Select Sector SPDR Fund ; United States Natural Gas Fund LP; Apache Corp.; Occidental Petroleum; Anadarko Petroleum, and Schlumberger.

I like how people don't seem to consider how with prices that high and the dollar and economy weak, how that will affect driving habits.

I see more mopeds and bicycles in the furture.

and i smell a major protest by the people

perople are so tired of the LIES and EXCUSES of this admin thats why they wanted the dmeos instead of the god ole party

thats why theyll get so sick and theyll probably never have them again for a long while In office :angry: :angry: :angry: :angry:

Not that I disagree with your premise, but do you REALLY think a Democrat President over the last 30 years would have made a real difference?

Bill Clinton, as one example?

take the scandal out


and he did help the economy

didnt he?

:huh:

Presidents don't really help the economy. Clinton just happened to be in office when the internet blew up and brought several hundred billon dollars of investment money with it. When that little balloon burst, it brought us the recession of 2001 (helped by 9/11).

But Clinton's energy policy was no different than any other President since Carter - Keep the oil flowing at any cost.

Now that the oil can't flow any faster, we're screwed.

okay thanks

:)

When Clinton was president I filled my tank with 87-cents per gallon gas.

Mostly thanks to Carter and Reagan.

After the embargoes of the 70's, America reduced it's oil imports 50% and cut it's ME oil imports by 85%. We were well on our way to being energy independent. But as soon as Ronnie RayGun got into office, we abandoned that strategy. His entire energy policy was go get oil as cheaply as we could get it.

Helping him along was the fact that OPEC cut the price of oil to $10/barrel in order to kill off Carter's alternative energy initiatives. If Ronnie had had a spine in his back he would have taxed imported oil by the exact amount OPEC cut prices, used that tax to fund renewables and efficiency, and finished killing off the fossil fuel economy.

And NOTHING has happened since he left office that would explain the increase in prices.

The President does not control oil prices. Period.

President Bush took office.

Nuff said.

And while he may not control oil prices. His policies can effect them

Oh, I forgot. Bush caused 9/11 and Hurricane Katrina.

And the worldwide increase in petroleum consumption.

tyheb

When Clinton was in office, I made around $12K per year. I now make 10 times that. Should I vote for Bush for a third term?

Oh, sorry, I thought you were going to seriously try to discuss shit.

I also like how you credit bush for your increase of income that I would think was caused by your hard work and experience.

The problem with your theory is that the policies Bush has for the big oil companies SHOULD mean lower prices at the pump. We give them billions of dollars in tax incentives, exempt them from certain environmental regualtions, and bascially build our entire energy policy around a philosophy of "what's good for big oil is good for America and our economy".

What's happened is that we've run up against supply and demand restraints. There simply isn't enough oil in the world for all 6.5 billion of us to live the lifestyle Americans live. But that's not going to stop them from trying.

You think oil prices quadrupled because "President Bush took office.....nuff said," and you want me to seriously discuss shit?

Why don't you try explaining what, if anything, Clinton did to keep prices low and what, if anything, Bush did that caused them to rise? Because the energy policies of the two were damn near identical.

The President does not control oil prices. That is a simple fact. He CAN raise or lower the tax (with Congressional approval), but that is pennies. He CAN set foreign policy that affects prices, but the affect of Bush's foreign policy on oil prices has been negligible at best.

9/11 caused major disruption in the ME that HAD to be addressed, which in turn caused market worries and speculative pricing. Again, Katrina disrupted the oil supply by seriously compromising refining capacity (or, more accurately, exposed how fragile our refining capacity is). And the most important factor in this is simple: demand for oil worldwide has gone through the roof. And not only does the President have nothing to do with that, but in fact WE have very little to do with that -- most of the excess demand has come from China and other formerly non-consuming countries.

Oil is a finite commodity. As it becomes more scarce (whether through over-consumption as is happening now, or through scarce supply, as will happen in the future), the price goes up. That's economics 101.

And it doesn't have jack shit to do with who the President is. THAT was the point of my comparison -- *I* don't think my income went up because of anything President Bush did. YOU apparently think gas prices went up because of something he did. My point is simply this -- both are coincidental.

Don't try to show me up with your "I can say in two sentences what you've tried to say in three long posts" schtick.

I see through your thinly veiled attack on my wit nr6

I have nothing to back it up but I was thinking more in terms of his policies with other oil exporters and especially the mid-east. I thought, at the time, when bush was first elected that how they view us changed as bush basically dropped all the shit clinton did for piece over there and he basically ignored the middle east until they rammed some airplanes in our towers.

Also I think the fuel it takes to move our war machine about subtracts from fuel that could be in the market.

How about you don't talk to me. You're twisting shit. You're moving things about and going to ridiculous extremes. Instead of asking for any kind of clarity, you just go off on stupid rants.

Anything I say you will just throw a fit at. I'm done with you.

You don't even try to make connections with things. You're narrow-minded

What did I twist?

You offered NO support, NO argument. NO discussion (and when *I* offer some discussion, you don't want to talk anymore). You just said Clinton had oil prices at $0.87 per gallon and they went up when "President Bush took office.....nuff said."

How in the hell did I twist the itty bitty bit you actually said?

Your shorts are the only thing twisted here, and I honestly don't know why. Untwist them and actually back up what you said. No one is attacking you.

What?

I said "Flight's a good kid."

Whaa-aat???

We need to reduce world population. Is the bird flu strong enough?

"Overpopulation: Just the right amount of me, WAY too much of you."

--P.J. O'Rourke

nr6

I wouldn't mind seeing world population down to around 1-2 billion total with only enough births to sustain that number thereafter. That's the number that the planet can support without massive fossil fuel imputs into farming.

That would include bringing America down to around 100 million.

I don't think bird flu or any other pandemic could bring our numbers down that far. But peak oil will. The only reason there are 6.5 billion of us right now is because of the last 150 years of cheap energy that's let farmers grow enough food to feed us. Now that energy imputs into farming is skyrocketing, peopel will begin to starve.

Gas to Hit $7 a Gallon
By Marty Jerome April 29, 2008 | 2:00:00

Both Qatar's oil minister and the head of OPEC can see oil hitting $200 a barrel before the end of the year and one analyst says gas could reach $7 a gallon within four years. That could mean cataclysm for the global economy.

The world got a little relief today when BP reopened its North Sea pipeline. But the price of gas is averaging $3.60 a gallon and the price of oil is flirting with $120 a barrel with no relief in sight. Market forces don't seem to be functioning in their normal order. OPEC controls only about half of the world's oil supply. Ordinarily, when prices spike skyward, the world's non-cartel spigots open wide. Why isn't this happening and who's to blame?

Oil Companies. Admittedly, obscenely compensated oil executives are laying low these days. Big Oil is rolling in profits. The Bush Administration's tax subsidies to oil companies, which were intended to prod exploration, should infuriate commuters. And yet the profit margins of oil giants are only slightly higher than the average for the S&P 500. And much of the wealth from these companies is pumped back into the economy in dividends, employment, capital spending and the like. Big Oil shouldn't get a walk (and windfall profit taxes make more sense than ever). But it's only a small part of the problem.

China and India. It seems to be a global fact that an automobile signals your arrival into the middle class. Without question, demand for oil in these countries is putting an inexorable upward push on gas prices. This isn't going to change in your lifetime, and it should sound the alarm for North Americans and Europeans that their middle-class lives will be threatened unless they develop alternative forms of energy -- fast. But the increasing demand for oil in China and India is a long-term, slow slope trajectory. It doesn't explain recent spikes. And in the short term, it's self correcting. As oil prices spike, economies slow and the demand for oil eases. So does its price.

Ben Bernanke. Oil is currently priced in U.S. dollars. The Federal Reserve has feverishly tried to calm credit markets in recent months with lower interest rates, which are a kind of Valium for bankers. As interest rates drop, so does the value of the dollar. So it takes more dollars to buy a barrel of oil. Without question, the credit crisis is a more pressing concern than high gas prices. Credit, after all, is the life blood of an economy. It is widely expected that tomorrow the Feds will reduce interest rates again. But many analysts believe this is the last cut we'll see for a while. Fighting inflation -- including rising gasoline prices -- is becoming a priority. When interest rates begin inching up again, it will be bad news if you're taking out a car loan, good news at the pump. In the meantime, just be glad you don't have Ben Bernanke's job.

Speculators. It's never a good omen when fear swallows reason on the trading floor. But this seems to explain part of what's happening with the price of oil. Or maybe it's just greed. Whatever. The good news is that these speculative frenzies tend to end quickly. And ultimately, it's traders' fingers that get burned, not consumers.

Suppliers. Here's the mysterious missing piece in high gas prices: Saudi Arabia, Kuwait, Qatar and other OPEC members try to keep supplies tight and prices high. But England, Norway, Russia and other non-OPEC countries open the spigots to take advantage of high prices. This usually brings prices down. But supply disruptions have become rife -- even with OPEC countries, such as Nigeria, thanks to an insurgency that keeps shutting down its pipeline. Norway's production has dropped by 25 percent since its peak in 2001. Britain's has dropped by 43 percent. Alaska's Prudhoe Bay has dropped by 65 percent from its peak. Russia's is down and so is Mexico's. It's enough to make you think speculators are on to something.

When does fear resemble reason?

I'm gonna predict gas next spring is less than $3 a gallon again.

Only way I see that happening is with a pretty big drop in demand.

I'll betcha a beer it isn't below $3 next May 1st.

You're on!

Ooooooo, ya'll are some high-rollin' gamblers, aren't ya? B)

deathdawg, you might as well go ahead & tell AEN your favorite flavor.

Is the Weak Dollar to Blame for High Oil Prices?

by Adam Davidson
NPR.org

All Things Considered, April 29, 2008 ·

Plenty of analysts and economists are serving up theories about why oil prices are so high. But those theories contradict each other or are built on weak evidence. Nobody has cracked the code.

JP Morgan economist David Hensley gets paid to explain this oil price spike — and even he throws up his hands.

"The problem is that no one seems to be able to put together a coherent story as to why commodity prices are as high as they are," Hensley says. "So, we're all left fumbling around, trying to put one together on our own."

But the head of OPEC has said it's all the fault of the United States and the weak dollar.

He is certainly at least partially right. By definition, the weaker the dollar is, the less a dollar buys. The dollar has lost around 10 percent of its value in the world over the last year, so a dollar should buy about 10 percent less oil than it did a year ago. But oil didn't go up 10 percent in the last year; oil prices are up 85 percent.

"It must be the case that something else is going on here that extends way beyond the weak dollar," Hensley says.

So, if it's not just the weak dollar sending oil prices up, maybe it's supply or demand. Maybe supplies are lower than last year or demand is higher.

Hensley says this might seem like an easy question to answer, if we knew what supply and demand were. But strange as it may seem: Nobody knows how much oil the world actually demands each year.

"At the same time," he says, "we don't know for sure what the supply is at any point in time."

So, he says, we guess what the supply and demand are. And the best guess tells us that supply hasn't gone down enough and demand hasn't gone up enough over the last year to account for the huge run up in fuel prices.

"Investors are looking for a place to make money," says Jim Williams, an oil economist with WTRG.com, "and the only thing that seems to be going up is the price of crude oil."

Investors, of course, are always looking for a place to make money. But last year, Williams says, there were also the subprime housing market and stock market to invest in. Oil was one option among many. Now, it looks like the only option.

"But here's the problem that's created: You got that good idea because you saw oil going up and nothing up — so did a whole bunch of other people," Williams says. "What happens when a bunch of people want something they didn't want before? The price goes up."

This is called "speculative investment." People buy oil not because they want oil, but because they are speculating that oil will keep going up.

Now, here's what's interesting: The weaker the dollar, the more this happens. Investors turn away from U.S. investments — Apple computer or treasury bonds, for example —because the dollar keeps losing value. They don't want dollars. That makes oil even more attractive, which sends the price of oil higher. That, in turn, weakens the U.S. economy, which sends the dollar lower.

So, it's not just the head of OPEC saying it. Many believe that a weak dollar can push oil up far higher than seems to make sense.

Bought me some rice and beans for the famine the other day. Anybody know how long cured ham will keep?

Gas Prices Continue Climbing

by Joshua Brockman

NPR.org, April 23, 2008 ·

The cost of gas reached a new high on Tuesday, escalating to a national average of $3.51 per gallon — almost 66 cents higher than the price a year ago. The sharp rise has been driven, in part, by the increase in the cost of crude oil, now near $120, and the declining value of the dollar.

The sticker shock may not end soon. Here's a guide to what's going on at the pump.

What's driving up prices now?

The falling dollar, the transformation of commodity markets into financial markets and steady global demand for oil are all contributing factors, says Mark Zandi, chief economist for Moody's Economy.com and an economic adviser to Republican Sen. John McCain's presidential campaign.

"Given the turmoil in the credit markets, investors are turning to commodities and oil as a trading vehicle," Zandi explains. "It doesn't take a whole lot of money" flowing out of the bond or stock market and into oil or natural gas to drive up prices.

Typically during a recession in the United States, demand for oil falls because people make a conscious decision to drive less. But any decline in U.S. fuel consumption has been offset by greater demand for all kinds of fuel in emerging economies, which Zandi says are doing well and therefore contributing to the price escalation.

Strong global demand is likely to increase, not decrease, pressure on U.S. gas and oil prices. "China, India and other developing countries [that] are developing their economies –and a middle class — just keep putting more pressure on the supply of crude oil to turn into energy for themselves," says Jim Boyd, vice chairman of the California Energy Commission.

Is there any chance prices will fall soon?

No. Gas prices are rising quickly. At the beginning of the year, a gallon cost $3. Analysts and economists view the rise to more than $3.50 as a step along the way to prices that may exceed $4.

Is any relief coming?

Last week in Congress, Sen. John McCain proposed suspending the federal gas tax between Memorial Day and Labor Day this year as a measure of relief for consumers during the height of the driving season. The federal tax is 18.4 cents per gallon of gas and 24.4 cents per gallon of diesel.

The question to ask about such plans, says Billy Pizer, an economist with the Washington, D.C., think tank Resources for the Future, is how much of the money will flow into the hands of consumers versus corporations.

Some economists say that suspending the tax will only promote greater consumption and drive prices up — sending more money to oil producers, not consumers.

Are Americans feeling particularly squeezed because oil is priced in dollars and our currency is weak?

Zandi says the downturn in the U.S. economy, which he believes is in a recession, is taking a toll in a variety of ways.

"Nothing is going right for consumers in particular," says Zandi. "We're losing jobs, the stock market is down. House prices are falling. Gas and food prices are rising. It's all very debilitating, so the higher gas prices hurt more in that kind of context."

Will prices drop once the summer driving season ends?

After summer, gas prices typically do fall — but it depends on the price of crude oil, economists say. In the fall, the problem may shift – especially for consumers in colder U.S. regions —to increased costs for heating homes.

The Southeast, with a larger concentration of lower-income households, is typically hardest hit by rising gas and oil prices because residents spend proportionately more on energy, says Zandi.

Will we ever return to gas at $2 a gallon?

It's unlikely, especially in the near term.

"Every penny increase in the gasoline costs the American consumer $1 billion annually," says Zandi. "If we go from $3 to $4 that means $100 billion in extra cost."

Will the current pricing scenario hasten the use and development of new fuels and vehicles?

As more consumers feel pinched at the pump, their discomfort may spark individual and corporate action. "High prices in the market create responses on both the supply and demand side for fuel," says Pizer. This translates into consumers trying to save gas by driving less or searching for cars with higher fuel economy, he says. On the supply side, companies may turn to conventional sources for fuel that were not profitable in the past because they were difficult to obtain, unconventional sources that may have higher production costs or alternative fuels, he explains.

"I do feel sorry for the American consumer," says Boyd. "We've predicated our lifestyle on almost the God-given right to cheap gasoline. It's a rude awakening — a permanent awakening — we've got to have a mixed portfolio of transportation fuels. And we have to have more efficient motor vehicles."

Why are gas prices higher in California?

Since the early 1990s, to comply with federal law and its own stringent air quality standards, California has produced and utilized a different blend of gas that is more costly to produce. On Tuesday, the California retail price was $3.86, according to the California Energy Commission — 35 cents higher than the national average. Boyd attributes a third of the price difference to production costs. The remainder, he says, is because demand exceeds supply.

Material from The Associated Press was used in this report.

Roll back the clock to 2004. How many people were paying attention then to the warnings? This is just one "example"

A Perfect Storm About To Hit

By Jeremy Rifkin

25 March, 2004 by the
The Guardian

The average nationwide price of a gallon of gasoline in America reached a record high of $1.77 this month. The steady spike in prices has left analysts wondering if this is a harbinger of even more dramatic increases as motorists head into the spring and summer months. Get ready for what might become the economy's version of the perfect storm later this summer. The devastation could quickly spread to the UK and the rest of the world, with dire consequences for the global economy. The first hint of what might be in store came last month when Opec announced its decision to withdraw 1m barrels of crude oil a day from the market. Opec is worried about the weakening value of the dollar: it has lost one-third of its value in just under two years. Since Opec sells oil for dollars, the oil-producing countries are losing precious revenue as the value of the dollar continues to erode. And because oil-producing countries then turn around and purchase much of their goods and services from the EU and must pay in euros, their purchasing power continues to deteriorate. (The euro is currently valued at $1.23.)

How will the weaker dollar affect oil prices? Philip K Verleger, the dean of US oil market analysts and a visiting fellow at the Institute for International Economics, suggests that "oil-exporting countries may decide to adjust their price band to reflect the falling value of the dollar". If the dollar continues to slide, he warns, we could see oil prices rising from the current $38.18 a barrel to a record high of $40 by midsummer.

There are other dark clouds on the horizon. US crude oil inventories are at the lowest point since the mid 70s, and the retail gasoline market is operating with little reserve margin as we move into the summer months, where more travel will increase demand. The dwindling oil reserves are made worse by the White House decision to replenish the strategic petroleum reserve, further reducing the amount of gasoline available.

Verleger says gasoline could climb as high as $3.50 a gallon before leveling off at $2 by the autumn. How high prices eventually soar could depend on still other factors, including potential oil disruptions in Venezuela and the Middle East. There is also the prospect that one or two major refineries might fail during peak demand this summer - not that unusual when increased consumer pressure forces refineries to produce at peak capacity without taking the time for proper maintenance.

Here is where events potentially begin to feed off each other, creating the conditions for the perfect storm for the economy. If the price of oil increases to $40 a barrel with an accompanying rise in gasoline prices, the already weak economic recovery could stall.

How then do we lower the price of a barrel of oil? We'd have to strengthen the value of the dollar so that Opec would not be forced to raise prices to compensate for the deteriorating value of the currency. But the dollar's value is declining because of America's growing debt. The IMF is so concerned about US debt - the result of rising budget deficits and trade imbalance - that it issued a report warning that if steps weren't taken to reverse the trend, it could threaten the financial stability of the world economy.

An ever-weaker dollar makes foreign investors less interested in financing the mushrooming US debt. The US could raise interest rates, making it more attractive for foreign investors, but that would mean higher interest rates for US companies and consumers, which could dampen the already weak recovery and send us back into a recession in the US and around the world.

So we have all the conditions coming together to create the perfect economic storm: record oil prices triggering a restriction in US economic growth and an increase in the federal budget deficit, accompanied by further erosion in the value of the dollar - with increased budget deficits and the diminished value of the dollar leading in turn to higher interest rates to convince foreign investors to lend the US additional money, followed by a further retraction of the US economy as rising interest rates lead to a drop in domestic investment and consumption. The cascade of events touches off a tsunami that engulfs the rest of the global economy, submerging the world in deep recession.

As long as the US and global economy are increasingly dependent on an ever-dwindling supply of oil from the Middle East, the conditions for a perfect economic storm will continue to haunt us. The solution, in the long run, is to wean the world off its dependency on oil. That would require much tougher fuel efficiency standards, greater energy conservation measures, support of hybrid vehicles and a switch to renewable sources of energy. Short of that, expect the storm clouds to gather in intensity.

· Jeremy Rifkin is the author of 'The Hydrogen Economy' and president of the Foundation on Economic Trends in Washington DC

© Guardian Newspapers Limited 2004

5 years I think.

btw, Country ham would be a good choice for meat. It requires no addition cooking. The salt, smoke and time have already cooked it.

It can be served like Italian prosciutto. Just shave it thinly and eat away.

I was really tired when I posted this last night, and I meant this the other way around. DD, you're gonna lose that bet, so ya might wanna check the beer thread for AEN's favorite flava.