Here comes $100 oil, and $3 gas

Here comes $100 oil, and $3 gas

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NEW YORK (CNNMoney.com) -- With oil prices setting records over $90 a barrel - and $100 looking ever more likely - experts say there's a good chance drivers will see $3 gasoline before the end of the year.

"Three dollar gasoline in this market is unavoidable," said Stephen Schork, publisher of the industry newsletter the Schork Report. "At this rate, we're going to see $4 a gallon."

Crude oil prices have soared nearly 30 percent over the last month, mainly over fears that supply won't meet demand, a falling U.S. dollar, and what some say is a high degree of speculative investment money.

But so far drivers have been lucky. The national average price for gasoline has risen barely one cent, going from $2.81 last month to $2.82 this month, according to the motorist organization AAA, although in many areas of the country gasoline is already over $3.

Analysts have said the relatively stable gasoline price is due to slack demand following the high-demand summer driving season.

But the relatively cheap gas prices are causing profit margins to slip for refiners, who have to pay top dollar for crude but aren't passing along the extra costs for consumers, yet.

"That doesn't seem sustainable," said Kevin Norrish, a commodities analyst at Barclays in London.

Norrish said it's likely refiners will scale back gas production, just as the higher demand holidays approach.

"At some point, it has to happen," he said.

Schork also said a lack of refining capacity means U.S. refiners will struggle to produce both gasoline and heating oil, so the country will end up importing more gas during the holidays. And he noted that importing gas with a weak U.S. dollar is an expensive proposition.

"We could easily see $3 by the end of the year," he said.

Not all analysts agree.

Nauman Barakat, an energy trader at Macquarie Futures, the trading arm of Macquarie investment bank, said gasoline prices near $3 a gallon have kept demand down.

The Energy Information Administration says gasoline demand has been about flat for the last few months, whereas it usually grows by about

1.5 percent a year.

"We're not going to see a similar increase in gas prices," said Barakat. "But if [oil] prices stay at these numbers, then of course it will be a different story come spring."

And therein lies the catch. All the analysts in this story expect crude to hit $100 a barrel.

"It's a matter of when, not if," said Norrish.

Norrish said it was fundamentals, not speculative investment money, driving oil prices - strong demand, falling inventories, no production increases from OPEC.

"The underlying market balance will continue to tighten, and if the geopolitical situation worsens, we'll get to $100 very quickly," he said.

Barakat said there are now more traders betting oil will rise to $100 than there were betting it would cross $90 back when crude was still in the $80s.

And Schork noted the sheer amount of oil contracts trading, and the fact that OPEC tried to cool prices back in September with a production increase, did nothing but send prices higher.

"There's a tremendous amount of bull energy in this market," he said. 'There's no reason we can't get to $100."

Reply to
Jim Higgins
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Watched a presentation from GRTC bus service. They are anticipating $5 a gallon gas by next summer.They are very optimistic on people using the buses in the area after such an increase.

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Reply to
Chevy Man

Just in time for winter, eh what?

Reply to
HLS

on Saturday 27 October 2007 07:10 am, someone posing as Jim Higgins took a rock and etched into the cave:

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OMG! $3/gal gas???

Wow, that seems cheap. Where can I get some??

Reply to
PerfectReign

Have to wonder if our troops came home would the price drop.

Reply to
Tim

Uh,,,,your girlfriend?

Reply to
HLS

on Sunday 28 October 2007 05:23 pm, someone posing as HLS took a rock and etched into the cave:

Oooh! A pathetic attempt at a response. Niiice...

Let's see...

Oh, a Windows user.

That explains the juvenile attempt at a comeback. Enjoy yerself in Texas, y'all!

By the way, I've been paying well over $3/gallon for the past two years. Hence the sarcastic post, in case you still don't get it.

Reply to
PerfectReign

Oh, I got it all right.

I have been accustomed to paying nearly US$8.00 per gallon, and am a strong believer that the price of oil and refinery products will continue to rise.....especially with the unrestrained consumption of the 50 States.

All this BS about working extra hours so you can pay for your gasoline is a load of manure. Continuing to buy ego cars that one doesnt need and that burn a lot of fuel is also manure.

Reply to
HLS

Wifes 98 Cadillac gets constant 19mpg around town and 26mpg on the road. This is a big car with a V-8. Why cant the small one do even better???????

Reply to
Chevy Man

Some can, Chevy Man. But my father-in-law's little GM pickup with the 2.2 litre engine can barely manage

17 mpg with the wind at its back. 17 mpg is, really, not worth a shit for a vehicle like this.

Larger vehicles, GM or not, often do not come up to 2/3 rds this level.

This is not a war about whether we are affluent enough to pay for the gasoline our roadhogs consume. It is, IMO, about conservation.

Reply to
HLS

Just as a reference point, my Silverado gets 15mpg regardless. Empty, loaded, highway, 'round town. The truck only knows one mileage rating -

15mpg. That's in 2WD of course. 4 Hi isn't a terribly big drop, but when I'm plowing snow in 4Lo, you don't even want to know the mileage it gets.
Reply to
Mike Marlow

My Dodge van gets 17-18. ..

On a global basis, this isnt worth a shit either. It is better than some.

We are in a war with oil producing nations, and we have a dollar that is in the potty.

We can delude ourselves, if we wish, but smart money looks at global oil and fuel problems.

We have a hard road in front of us.

Reply to
HLS

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