Could gas prices hit $6 a gallon?
All we need are a couple of hurricanes, one economist says, combined with the crisis in Libya and the falling dollar.
Updated May 26, 4 p.m. EST
Planning to hit the road this summer? You might want to keep an eye on the AAA Fuel Gauge Report, which takes the daily temperature of gas prices around the nation.
The national average on May 26 for regular gas was $3.81 a gallon -- up $1.04 from a year ago. That's a 38% increase. Thankfully, gas prices have come down slightly in time for Memorial Day weekend, but some traders are betting that they'll rise again soon.
Gasoline futures are higher this week on the expectation that refinery outages in Illinois will cut into supply. Demand for fuel is likely to rise over the weekend as Americans hit the road.
As gas prices have soared this year, some experts wonder whether gas prices could reach $6 a gallon. Ridiculous? Not when you think about the perfect storm of factors pushing pump prices ever higher.
Speculators: A growing number of experts now think the gasoline market is being distorted by traders and investors who are speculating, Maclean's reports. "You simply can't explain these levels of volatility by supply and demand because market fundamentals don't shift that quickly over such a short period of time," a law professor and former commodity futures regulator told the magazine. "Most observers now believe speculators are actively manipulating oil prices."
Libya: The U.S. doesn't even get much oil from Libya; most of Libya's light sweet crude goes to Europe. But the U.S. imports 40% of its crude from Europe, refines it and sends it back to Europe in the form of gasoline and diesel, ABC News reports.
So if Europe feels the hit from Libya, the U.S. will, too. Global oil output fell in March to 88.3 million barrels a day, a 700,000-barrel drop mainly due to reduced supply from Libya, MarketWatch reports. Experts are watching closely to see whether the unrest in the Middle East will spread to Saudi Arabia, which supplies 11% of America's crude oil, according to ABC News.
The falling dollar: The dollar is depreciating as investors realize the U.S. is not the place to find high interest rates on their money. They're going elsewhere for higher rates, causing the dollar to fall.
That means $1 won't buy as much gas as in the past (not that $1 ever bought much gas in recent memory). Commodities are priced in dollars, CNBC reports, and are coming at a discount on the foreign markets.
Rising demand: Economies across the globe are climbing out of recession, putting people back to work. They need more gas to get there, so demand is growing in strengthening economies.
All of those factors have led one economist, Richard Hastings at Global Hunter Securities in North Carolina, to think that $6 a gallon for gas is a real possibility. All you need now are a couple of damaging hurricanes in the wrong place, he told CNBC, and "prices could go up in a quasi-exponential manner."
Hastings said that in that case, gas would have no problem reaching $6.50 a gallon this summer.
We're already seeing people make changes in response to the uptick in gas prices. ABC News reports that in some cities, total strangers are meeting up to share a ride and hop into the carpool lane. Other people are showing new interest in hybrid or electric cars like the new Nissan Leaf.
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This is not a very well-written article. Under Bush, the hedge funds were allowed to "bet" on gas prices. Similar to other commodities, when the hedge funds get involved, the price fluctuates a lot (both up and down). The hedge funds will push gas up as high as possible, take their profits and then run. I read today that Obama was starting a task force to look at gas prices. He need look no further than the fact that hedge funds are allowed to play with this commodity. It needs to stop and it has nothing to do with the unrest in Libya (before that...Egypt). This is what uninformed writers like this author want us to believe. Poor writing in my opinion.
Let the greedy morons keep raising the price of fuel. When the truck drivers can't afford to drive their trucks anymore because the fuel is to high. Then everything will come to a stop. No food, diapers, drink, supplies, meds, and so on. When the trucks stop, our supply line stops. Those greedy SOB's better start thinking before the truckers say ok that's enough. I remember when diesel was cheaper than regular, but it's way over premium now. Go ahead drive the prices to the point that people will finally wake up and overthrow this government and kicks their a$$es out. As far as I'm concerned I am sick to death of these greedy companies and corrupt government.
I ask you people this, what is a lobbyist? A lobbyist is just a new name for bribery = a person who bribes people to get their way which is suppose to be against the law.
gas prices going up, food prices going up, health care costs going up, everything going up EXCEPT wages..that is not the way to get out of a recession.
time to tell the tree huggers to get lost and start using our own resources. plenty of oil and natural gas in this country to provide supply for many, many years.
time to tell the government to outlaw speculation on oil futures as this, i belive, is the main cause for the ungodly prices we are now stuck with.
this goes to the author of this article (kim Peterson). Why aren't you writing and article, on how these CEO's should be rolling a portion of their 36.5 billon profit back into the gas pumps to easy the bourdon. Why aren't you writing about, how the oil companies are letting the stock market do the price gouging for them. Why aren't writing about how the oil companies are not paying 100.+ dollars for oil, and how they have long term purchase contracts for $30-50 per barrel for oil, and the true whole sale price for gas is really $2.00-2.25 per gallon.
That's why these companies are raping in 36.5 billon in profits, the stock market is a legal form of price gouging. But here's the biggest question you should writing about, before all these middle east up rising started to occur (MONTHS), how did these stock speculators know the price of gas would be $5.00/gallon by summer. Now do some serious writing and get back to us - The American People.
"But the U.S. imports 40% of its crude from Europe, refines it and sends it back to Europe in the form of gasoline and diesel"
Who cares where Europe gets their oil from? Especially since the quote above says we just refine it and send it back to them...doesn't say we use it. This is plain and simple screwing of the American people! If our elected officials would put the interest of the American people first and I'm not just talking about their lobbyist friends and big business...gas would be less than $3/gallon. The US needs to stop sending the oil it produces to other country's for huge profits...period! We produce more than enough to cover our own needs. Now I'm not against them making some money on it in the free market...but do it AFTER the American peoples needs are taken care of first and keep our prices down. That will help America get the ship righted and people back to work....this is killing any chance of that happening now. I don't care how much the President or any other politician tries to spin things and tell us all everything is just fine. It's not...except for the folks in DC that have all their health care and retirement needs taken care of...the rest of us sure don't!
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