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.
Dandordan@aol.com
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