Will gas climb to $5 a gallon?
Global events are putting upward pressure on oil prices, but there are other factors to consider. Here's another view.
This post comes from Meg Handley at partner site U.S. News & World Report.
Buzz about the possibility of gas costing $5 a gallon this summer caused quite a stir Tuesday, but could prices really spike that high come June?
Average gas prices hovered around $3.39 a gallon nationally Monday -- the highest January gas prices ever -- up 11 cents this month and almost 30 cents higher than last year's prices. That's still a long way off from the $4.11-a-gallon peak the nation saw in July 2008, but analysts point to a variety of economic pressures that could translate into painful prices at the pump. Post continues below.
For starters, tensions with Iran over its threats to close off the Strait of Hormuz have pushed crude oil prices up over the past several weeks, increasing costs for refiners and retailers who are further down the production and delivery stream.
With Tehran digging in its heels, the situation recalls some of the same supply issues the world had to deal with following the uprisings in Libya, which severely curtailed the country's production capacity and limited oil supply. The Strait of Hormuz is the world's most important oil transit chokepoint, according to the U.S. Energy Information Agency, shuttling in about 17 million barrels of oil per day, which amounts to about 20% of oil worldwide.
Also, with the U.S. seeing some glimmers of economic recovery, demand for gasoline has ramped up. U.S. demand coupled with other emerging markets is likely to keep prices elevated.
"We're forecasting a number approaching $4 (retail price) this summer," says Sarah Emerson, president of Energy Security Analysis. "That's still a high price. That's a painful price and people might say, 'Well, I'm not going to drive as much.'"
Still, $5-a-gallon gas probably isn't in the cards. European economies face a particularly hard economic year as they try to repair their balance sheets, and China's growth, while still good, is showing signs of slowing. Those factors could reduce demand for oil and ease price pressures.
"If the Iran story doesn't pan out and oil continues to flow unhindered, it's really hard to create those stories of $5 (gasoline)," Emerson says.
Whether people just don't realize it or want to admit it, this is the key to our economy. Think about when gas was around $1.25 per gallon, we didn't have any economic issues. Also, in 2008, when gas fell back under $2 per gallon, suddenly the economy was "improving." But that didn't last long. It's simple really, Let's say I have a 20 gallon tank. Before the price surge I could fill up my car for $22, now at $3.25 it cost $65. That's $43 a week ($172 per month) I can't use to buy groceries or spend at Walmart which hurts the economy.
Now put this burden on any transportation company...diesel prices are higher than gas prices. It now costs more to ship products so, in turn, transportation companies have to charge more. When the store pays more for shipping then they charge more for the product. So, now the groceries I was spending that extra $172 a month on have gone up too, making it even harder for me to buy groceries. So I have move money around to afford groceries...what suffers? the electric bill? the water bill? No...the mortgage. Anyone see any correlation here? Or am I the only person in America who has this figured out? Because I seem to be the only person who is talking about it.
Simply put, find a way to make gasoline under $2 again and the economy WILL recover...quickly.
"For starters, tensions with Iran over its threats to close off the Straights of Hormuz have pushed crude oil prices up over the past several weeks, increasing costs for refiners and retailers who are further down the production and delivery stream".
Ahh, threats to close off the Strait of Hormuz have pushed crude prices.....once again speculators are driving up prices based on something that might or not happen at all. Can anyone say GREED?
As long as our sorry ARS lawmakers allow this kind of B.S. continue to happen, nothing will change on Wall Street! Get rid of lobbyists and speculators and let's see what happens to our economy.
The gasoline prices are the scam of the century!!
Oil companies and Wall Street Speculators making billions of the backs of the American working class.
Our dumbernment is as dumb as a bag of hammers...Want to help the economy dumbas** in office? Get the price of gas back to 1.50 a gal! People will actually travel again. Stores will be able to lower prices because they won't be paying so much for deliveries...people would then be able to afford to buy other things instead of spending every $$ they make at the gas pump...un-flipping real how all these ivy league educated morons don't get this.
So yea they'll try to push it up to $5, because they can get away with it. NOT because any shortage or interruption.
Obama postponed the pipeline decision until after the election. The man has no xxxx. We need a strong leader who will either have the guts to push through projects which are in the best interest of the country or have the intestinal fortitude to stop projects for valid reasons.
Given today's politically correct environment it would be impossible to ever build the Hoover Dam or fill in a swamp to build Manhattan or parts of Boston. Could you imagine the lawsuits that would result in trying to build a new railroad across the country? How about building a new refinery? A good leader knows that there are costs associated for every project undertaken or denied. Our President must do what is best for the country!
Well, last time it got up over $4.00 it increased the price of
everything in our lives...? food was the first to increase...
Then anything involving transportation went up...
Guess what, fuel price came down, but all other prices remained up, so go figure ..?
Think $5.00 per gal. was what obamo was looking for...
and as long as people like you make excuses for the oil companies they will keep going up . look at their profit now and tell me they aren't raping us and most of it with oiloff our lands . tax them for all they make over a set profit and this will stop . ceo's making millions is out of control . none of them are worth it .
The price of gas right now in SoCal isn't far off of $5.00 a gal. The gas here is well above the national average. The price of fuel & gasoline is a direct contributor to the NON recovery that is going on in this state. People working just to be able to buy gas to go to work. Crazy just crazy!
I don't have the answer for this problem but sure wish I did. Big oil has there hands all over alternative fuels as well so they can gouge us there as well!
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