$3 Gasoline This Summer

[EdwardKnoxII 0]

http://netscape5.marketwatch.com/news/stor...pe&dist=special

 

Gas-pump sticker shocker

Retail prices expected to blow past record high

By Myra P. Saefong, CBS.MarketWatch.com

 

SAN FRANCISCO (CBS.MW) -- Get ready to dig deeper into your pockets at the gas station this summer: $3 per gallon gasoline could be headed to a pump near you.

 

 

The expanding U.S. economy, limited supplies of certain blends and unexpected output cuts by major producing nations will likely propel U.S. retail prices well past their record high, industry experts said.

 

The Organization of Petroleum Exporting Countries, which supplies 40 percent of the world's oil, agreed Feb. 10 to rein in an estimated 1.5 million barrels of daily overproduction. Members also voted to cut their official output target by 1 million barrels to 23.5 million barrels a day, excluding production from Iraq, starting April 1.

 

The cartel's action comes as the national retail price of gas is only 10 cents below the all-time average high of $1.73 a gallon reached last August.

 

"OPEC's decision ... is one more reason on an already lengthy list of why U.S. consumers are likely to pay the highest gasoline prices on record this year," AAA spokesman Geoff Sundstrom said.

 

Gas prices "will certainly breach" the $2 mark on the back of OPEC's announcement, said Kevin Kerr, a senior trading director at KWEST Trading International. "At the same time, the economic recovery in the United States and other parts of the world ... and the draw on existing energy supplies could be disastrous."

 

Since the oil market didn't anticipate OPEC's dramatic moves, "the shockwave will be felt all the way to the pumps," Kerr said.

 

A survey of the five market analysts found all agree that retail gas prices will, at the very least, hit a new record this year.

 

Indeed, if crude inventories don't increase, and if OPEC votes to cut another 5 percent from its output, unleaded gas prices could reach the "upper limits of $2.75 to $3 this summer," said John Person, head financial analyst at Infinity Brokerage Services.

 

Dollar blame

 

One of the cartel's key reasons for the production cut -- a weaker U.S. dollar -- factors into expected price climb, thought the experts disagreed about its level of importance.

 

"Over and over again, OPEC raised crude oil prices ... saying the weaker dollar brings member nations lower revenues because oil is traded in dollars," Kerr said. "It isn't rocket science to figure out they will likely do this again with the dollar reaching new lows."

 

Fimat USA analyst John Kilduff sees a different driver. He said the dollar's decline coincides with a much bigger factor for oil prices: "The lowest U.S. crude-oil inventories in a generation."

 

Yet Tom Kloza, chief oil analyst at the Oil Price Information Service in Lakewood, N.J., believes the 2004 gasoline price rally won't be about crude, but about the level of gas supplies. "When traders fear a product may be 'short' as the season approaches, or when it actually is short or tight within [the] season, prices tend to migrate toward hyperbolic numbers."

 

Contributing factors

 

Retail prices will likely surpass $2 a gallon in two separate spikes," Kloza said, "one in the spring based on fear and uncertainty, and another toward the end of the summer."

 

The initial price jump will come during the transition from winter to summer blends of gasoline, which typically puts a strain on supply availability, Kloza said.

 

A variety of new state environmental regulations regarding gasoline formulation are having an increasingly disruptive impact on supplies, Fimat's Kilduff said.

 

"The mosaic formulation scheme that caused severe price spikes in California and the upper Midwest in the recent past is now coming to the New York Tri-State area, due to New York and Connecticut adopting ethanol as their oxygenation component, " he said. New Jersey has remained with the MTBE formulation, he added.

 

In addition, by July and August, the market might be experiencing average demand of 9.5 million barrels a day or higher at a time when production will likely top out at 8.8 million barrels or so, Kloza said.

 

With the economy gaining strength, this summer is "on pace to be a banner demand year," agreed Agbeli Ameko, a managing partner at energy-forecasting firm, Enercast Inc. "Supplies are lower and production is not keeping pace with this demand growth."

 

AAA's Sundstrom also noted that some travel experts expect robust spring and summer vacation seasons. That's a recipe for a peak-driving season where the supply and distribution system has no room for error, Kloza said.

 

"A refinery problem or two, an inordinate surge in demand, a loss of say, Venezuelan imports ... all this would create the much hackneyed 'perfect storm' characterization."

 

Paying the ultimate price

 

While Infinity's Person sees prices peaking at $3 in some metro areas in the worst of circumstances, OPIS' Kloza sees average prices rising above $2 but reaching the high-$2 range for only a brief period if at all. If any region sees prices near $3 a gallon, it would be already high-priced markets like California and Chicago and would occur only after a refinery outage or two, he said.

 

"The gasoline market will have an irregular heartbeat ... racing at times and resemble brachyadia at others," Kloza said. "The overall retail average for the year will be the highest ever," but there will a huge gap between the highest and lowest prices, which could still run as low as $1 a gallon in some states.

 

Fimat's Kilduff said it would be difficult for average prices to climb much higher than $2. "Some sort of government intervention would occur at levels around $2.25," he said, though he did accept the possibility of $3 gas in certain snag-prone areas, such as California.

 

Enercast's Ameko argued that federal and state politicians would likely intercede rather than sit idly by should prices skyrocket.

 

"Going into an election year, $3 retail prices would spell disaster," Ameko said. He doesn't expect demand to be strong enough to lift prices above $2.25, and suggested prices will average around $2.15.

 

Myra P. Saefong is a reporter for CBS.MarketWatch.com in San Francisco.

[Mole 0]

Well this sucks.

[Art Sandusky 0]

(invests in Oil)

[Guest Choken One]

*Digs in Shed for Bicycle*

[Guest]

That sounds like a really good idea.

[EricMM 0]

So what, pray tell, is the solution?

[Guest cobainwasmurdered]

invade Ira...oops

[Guest Krazy Karter]

When the fuck are those hybrid cars going mainstream?

 

I read last year that by the end of the decade most engines will be hybrid.

[Nevermortal 0]

God dammit.

[Ced 0]

Well at least I have a fuel efficient car, so my gas budget still won't be too bad. I'd expect a bunch of SUVs to enter the used vehicle market soon.

[Vern Gagne 0]

I always read about gas prices skyrocteting up to $3.00 a gallon. So far it's never happened. Heck up here the highest we've been is $1.68. Not cheap, but compared to what they pay in Europe, and what this reports says prices might be, it's not bad.

[NoCalMike 0]

For my normal driving habits......$10 a week gets it done unless gas prices go above 1.85, then I have to push it to about $12-$15 per week.

[Dr. Tom 0]

So what, pray tell, is the solution?

Getting more oil from places outside the Middle East

Carpooling

 

Since hybrids have yet to catch on, and the oil lobby is loath to let anything threaten their position, those are the best reasonable options for now.

[Slayer 0]

So what, pray tell, is the solution?

Getting more oil from places outside the Middle East

You mean like Venezuela?

 

Oh, wait...

[Dr. Tom 0]

So what, pray tell, is the solution?

Getting more oil from places outside the Middle East

You mean like Venezuela?

 

Oh, wait...

Heh. Yeah, wouldn't that be nice... ?

[ant_7000 0]

$3 dollars everywhere else but it'll cost $4 bucks in Illinois. It looks like i'll be riding buses and trains during the summer.

[Slayer 0]

Also, am I the only one who sees concern with the fact the article proclaims that prices might or may go up and everyone in this thread has responded like it's the definitive truth, 'cause lord knows that the media is good at predicting things

 

I should be taking advantage of all of you RIGHT NOW

[Youth N Asia 0]

Here in Michigan the gas has been $1.50-$1.80 the last month or so...I think this $3 gas thing was suppose to happen last year as well. Untill it actually happens I won't worry about it.

[A Happy Medium 0]

It averages about 1.55 here in Dallas/Fort Worth. It's not bad at all...but then again, it was only 1.00 about four years ago.

[DerangedHermit 0]

I think that $3 probably applies to California, any other state would probably be in the $1.80-$2 range during the summer.

 

/oh yeah, it says that in the article; RTFA dammit!

[MarvinisaLunatic 0]

Im going to either buy one of those cars that runs on used fast food french fry oil or get one and convert it into one. You can get some places to give to you for free since it costs them money to dispose of it. Heck, I could probably pilfer some off from work..

 

Page about it..

 

The potential to end the U.S. love affair with oil may be no farther than the neighborhood fast food restaurant. Modifications to the average diesel engine make it possible to run a car on used vegetable oil. Through the independent studies program at UC Santa Cruz, fourth- year student Ryan Reid has spent the last year working on a project to make alternative fuel options feasible for drivers.

 

"I’ve always been into alternative fuels," Reid told City on a Hill Press (CHP). "This was something I could do entirely on my own. I had no mechanical experience myself, and I wanted to make it feasible for other people who didn’t have mechanical experience."

 

On Thursday mornings Reid can be found bringing his diesel engine station wagon to the Stevenson college dining hall, where he collects 15 gallons of used fryer oil for free. Like most restaurants, the dining hall usually has to pay a tallow company to take the used oil away. Reid conducts the filtering process in the dormitory bathroom, heating the plastic jugs of oil in hot water and then running the oil through a filter over the bathroom drain. He lets the oil settle, and the clean oil that settles on the top is ready for use.

 

...

 

Reid continued to experiment with straight vegetable oil.

 

He purchased a Ford F250, ordered a conversion kit from Greasel Conversions, a company based in Missouri which sells and installs diesel conversion kits, and taught himself the basics, working with a mechanic supplied by TAPS.

 

"I wanted to be able to filter oil in the dorms, because it’s hard," Reid said. "If I can do it here, anyone can. And working with the truck helped me prove that it’s just as viable for larger vehicles." The truck went further on less fuel, running smoother, more quietly, and with increased acceleration. Currently, Reid continues to experiment with other installations, gathering experience and data about the benefits of alternative fuel.

 

"It only takes a few months to pay off the conversion kit in fuel costs," Reid said. "Plus, the car will run better, and I would say you run into fewer mechanical problems as a result. It just takes a little more work. You have to go get your fuel, and filter it, rather than just filling up at the pump."

 

VeggieGolf

That link is about how a 2002 Volkswagen Golf was fitted to run on Vegetable oil and gives even more specifics about how it works and etc.

[Matt Young 0]

It's already over $2 out here by Anaheim and Los Angeles. With the way traffic moves, I can't see how anyone can afford to drive. I'm kind of glad I don't have a car right now...

[Guest Agent of Oblivion]

It's a buck sixty-seven in rural indiana, and considering I have to drive forty miles round trip to work every day in a truck that costs thirty bucks to fill up...not good.

 

Kill more arabs, please..put them in presses and we'll use their blood.

[EVIL~! alkeiper 0]

Gas at my local station just increased to $1.81 a gallon, the highest EVER. I'm officially getting sick of this crap. I'm now paying $29 a week in gasoline alone. Just another reason to oust Bush in November.

 

Fun fact: If gasoline fell to $1.20 a gallon, I'd save over $400 a year.

[Guest Choken One]

gas is currently $1.51 for me.

 

But yesterday it was 1.77

 

I wouldn't mind it if it just stayed fucking STEADY.

[lomasmoney 0]

Why again is gas so fucking expensive all of a sudden, I mean can't they figure out how to make synthetic fuel or some shit

[Guest SweetNSexyDiva]

Gas in San Diego, CA is anywhere from $2.15 - $2.25 per gallon! Fucking A! I put $20 in and I barely got just over 9 gallons! They can't even blame the freaking war on this one! They are saying that there is a higher demand all of the sudden.... Crock of shit!

[Slayer 0]

Yesterday it jumped from 1.50 to 1.70 here, and first thing I thought about was this thread

 

Oh yeah, fuck California

[JJMc 0]

For my normal driving habits......$10 a week gets it done unless gas prices go above 1.85, then I have to push it to about $12-$15 per week.

right on for me.

[Guest Agent of Oblivion]

I spend close to fifty dollars a week in fucking gasoline.