Oil is plentiful as new discoveries continue to be made, natural gas exploration and production is up, the dollar has strengthened, it’s an election year, and so gasoline prices are going which direction? Down? Well, no, according to the experts, gasoline prices are rising and could top $6 per gallon by summer.

Each of the above conditions usually results in lower prices at the gas pump. If supply goes up on constant demand, then price should at least remain steady or go down. As new discoveries are made then supply goes up and at constant demand, price should go down. Even as production lags discovery, markets build in the worldwide supply figures. Natural gas production is soaring allowing for cheaper substitution for oil. When the dollar strengthens versus foreign currencies then each dollar buys more quantity of foreign oil and hence prices should go down for the same quantity. Usually election years result in government policies that are neutral for energy prices. So what is going on?

1) Iran has cut off supply to Western Europe as punishment for political stances. This has created increased demand for the remaining world supply from Europe although Iran likely will turn around and sell this supply elsewhere so perhaps this effect is temporary.

2) A possible military attack on Iran’s nuclear facilities could result in a closure of the Strait of Hormuz, the path for 20% of the world’s oil supply. This alone could result in $200 a barrel oil or about a doubling from the current prices. Defense Secretary Leon Panetta believes there is a “strong Likelihood” that military action will happen.

3) If Iran does cut off supply, Venezuela could follow and cut off their supplies to the U.S.

4) There is a shortage for U.S. east coast refinery capacity tied to the closings of several refineries.

5) While the dollar has strengthened versus the Euro, there still is concern that Federal Reserve policies and U.S. deficits will weaken the dollar. Weakness in the dollar feeds upward pressure on commodities like oil that is priced in dollars and thus is at a discount on foreign markets.

6) Storm season is coming again. Every year brings new worries about the potential impact of storms in the Gulf of Mexico on supply operations at sea and refinery operations on land.

7) Supplies from the Alberta oil sands now likely will go to Asia versus the U.S. now that the Keystone XL pipeline project has been stopped.

Last year was the highest priced year ever for gasoline and national averages for a gallon of regular are about $3.50 now. Consensus is that the current situation will result in prices over $4 by spring and any of the other possibilities, especially military action in the Middle East, could easily push gasoline prices to $6. Some people believe that rising gasoline prices are a sign that the economy is strengthening but one sure way to knock the economy back into recession is a $6 or even $4 per gallon gasoline price. And this, in turn, could have an impact on this year’s elections. Stay tuned.

– Steve Odland

http://www.forbes.com/sites/steveodland/2012/02/21/6-gas/

 

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OF COURSE there are factors beyond our control and political factors like Iran.... but the decisions that we are responsible for like not drilling in Alaska, the shut down of new projects in the gulf, and the stagnation/closing of refineries here, is absolutely disgusting.

well said could not agree more

 

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Bulleffingcrap, we are an exporter now.

...The U.S. exported more oil-based fuels than it imported in the first nine months of this year, making it likely that 2011 will be the first time since 1949 that the nation is a net exporter of such goods, primarily diesel.

That's not all. The U.S. has reversed another decades-long trend. It began producing more crude oil in 2008 than the year before and accelerated that upswing 3% in the first nine months of this year compared with the same period in 2010. That production has helped reduce U.S. imports of crude oil by about 10% since 2006...

http://www.usatoday.com/money/industries/energy/story/2011-12-16/us-oil-boom/52053236/1

Hooray for big oil!

Let's lease them more publicly owned oil producing land so they can make huge profits exporting it to China!

 

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Gas will never go that high... people will just stop driving/will make other technologies more viable.

It is pretty sick that we want to continue drilling the resources that we have... continue our dependence on crazies in the middle east instead of moving away from oil.

Oil is not our future and the longer we stay on it the more damage we do to our kids... when you have a cartel with the majority of the resource that is super easy to extract that sets prices and quotas you will always be dependent on someone else.

Lets continue to use all of our oil so that we can temporarily lower our own prices and let our kids figure it out... that is the American way... steal from your kids because we want the easy way out.

 

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Should have added Keystone to my list.

Oh, come on. You can't be that dumb, MForce. Keystone would have been primarily used to export fuel to other nations, created limited jobs, and had huge environmental impacts.

I'm sorry, but ANY increased oil exploration is a net LOSS, and that is a fact, climate deniers be damned.

 

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Don't we get these type of stories every year right before summer? Gas going to hit $10 a gallon by August, we're all gonna die cause we can't afford to drive?

 

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I have no problem with that.





No problem with this either.





TBD. Critics have said the same about other pipelines that are doing just fine.

Just look at what your idiot President did to try and shore up the Environmental Vote by delaying the Pipleine from the Oil Sands.

 

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