Experts: $4 a gallon gas coming soon Pricing analysts say consumers can expect even higher prices at the pump. August 31, 2005: 4:11 PM EDT By Grace Wong, CNN/Money staff writer http://money.cnn.com/2005/08/31/news/gas_prices/index.htm NEW YORK (CNN/Money) - Consumers can expect retail gas prices to rise to $4 a gallon soon, but whether they stay there depends on the long-term damage to oil facilities from Hurricane Katrina, oil and gas analysts said Wednesday. "There's no question gas will hit $4 a gallon," Ben Brockwell, director of pricing at the Oil Price Information Service, said. "The question is how high will it go and how long will it last?" OPIS tracks wholesale and retail oil prices and provides pricing information for AAA's daily reports on fuel prices. Brockwell said with gasoline prices now exceeding $3 a gallon before even reaching the wholesale level, it "doesn't take a genius" to expect retail prices to hit $4 a gallon soon. "Consumers haven't seen the worst of it yet," Brockwell said. He expects consumers in the Southeast and Northeast to be pinched first, following the impact of Hurricane Katrina on the Gulf Coast region. Katrina pressures gas supplies Katrina forced operators to close more than a tenth of the country's refining capacity and a quarter of its oil production, which sent gasoline prices surging. Two major pipelines that supply gasoline to key terminals and distribution centers within the eastern U.S. were shut down due to power outages caused by the storm. Colonial Pipeline said it hopes to be back in partial operation soon, while the date of Plantation Pipeline's restart is not clear. Each day the pipelines are closed, supplies get backlogged and distribution centers must rely on reserves. "With this kind of hiccup in refinery capacity, in stretched markets like California, you could see over $4 a gallon in gas," Evan Smith, an analyst at U.S. Global Investors, told CNN/Money. While it's still too early to fully assess the damage caused by Katrina, efforts to build up inventories of crude oil, natural gas and other products like gasoline will be set back by the storm, according to Nariman Behravesh, chief economist at Global Insight. In a research note, Behravesh laid out a worst-case scenario that puts average prices for regular unleaded gasoline at about $3.50 a gallon for the next four to six months. "The impact on consumer spending in such a scenario would be very dramatic, cutting the growth rate by as much as 3 percent and pushing real GDP growth in the fourth quarter closer to zero," he wrote. In a best-case scenario, he forecast retail pump prices to peak at $3 a gallon for a couple of months, but then fall back to around $2.50 by year-end. The nationwide average price for a gallon of regular unleaded hit a fresh high of $2.619 Wednesday, according to AAA, the largest U.S. motorist organization, formerly known as the American Automobile Association. Average gasoline prices have gained 40 percent in the last year. Prices for crude oil are also up sharply and are currently hovering near record highs just under $70 a barrel. I post this because I wonder if gas prices moving to this level is ENTIRELY bad. Is it possible that it will spur consumers to make better choices and learn to conserve while pushing policy makers to make swift changes to fuel economy requirements or maybe penalties on light trucks/SUV's that get 15mph? Or will it ruin growth to the point as forecasted in the article where the economy comes to a screeching halt as far as growth is concerned? Lastly, with Bush releasing oil form the Strategic Reserve to alleviate supply problems, will the oil companies that are getting this oil turn around and make record profits from it? How is it doled out, do they get it for "free" or pay the current futures price for a barrel of oil at approx $70 a pop? I can tell you, it is BEYOND outrage if they are allowed to profit in any way shape or form from the distillates like gasoline that are refined from the Strategic Reserve--surely you can agree regardless of you political stripe even if I am labeled a weak-minded liberal with no sense of our, *cough*, free market.
anyone? Surely you have some insight for us Bigtexxx or can explain some of the market forces at work mentioned in this article. FD? I read your thread in the hangout with your expert opinion on why it's "not that bad", perhaps you can enlighten us in this one.
