Gas Prices to Reach $4 per Gallon by Memorial Day 2011

Oil's Surge in 2010 Paves the Way for $4 Gasoline by Summer 2011

Price of oil rises 30 percent in 2010; gasoline prices could hit $4 a gallon in 2011

Decmeber 31, 2011

AP - The price of oil is poised for another run at $100 a barrel after a global economic rebound sent it surging 34 percent since May. That could push gasoline prices to $4 a gallon by summer in some parts of the country, experts say.

Flying, shipping a package and ordering a pizza all likely would get more expensive next year if that happens and companies pass along higher energy costs. Some economists say rising energy prices will slow economic growth.

The U.S. is the world's largest oil consumer, but prices since spring have been on a roll primarily because of rising demand in developing countries, especially China. China's oil consumption is expected to rise 5 percent next year; that compares with less than 1 percent growth forecast for the U.S.

Benchmark oil for February delivery rose $1.54 on Friday to end the year at $91.38 per barrel on the New York Mercantile Exchange. It reached $92.06 earlier in the day, the highest since Oct. 6, 2008. Nationwide gasoline pump prices now average $3.072 per gallon.

Gasoline expert Fred Rozell predicts that 15 states -- including Alaska, Hawaii, Connecticut and Rhode Island -- will see gasoline prices top $4 a gallon by Memorial Day.

"A dollar more per gallon isn't that much -- probably about $750 more per year for each motorist, but there's a psychological aspect to gas prices," he said. "People are going to be up in arms about this."

Higher oil prices have fattened oil company profits. Excluding BP PLC, the four other major investor-owned oil companies posted combined profits of $59.7 billion in the first nine months of the year, a 49 percent increase from the year before. Exxon Mobil Corp., Royal Dutch Shell, Chevron Corp. and Total SA are expected to earn $81 billion for the full year.

The fifth oil giant, BP, was held responsible for the largest offshore oil spill in U.S. history and booked $39.9 billion in charges related to the disaster. Excluding special expenses like the Gulf of Mexico spill, analysts say the company will still earn $20.2 billion in 2010.

"There's nothing this industry can't survive," Oppenheimer & Co. analyst Fadel Gheit said.

The price of energy and other commodities shifted into high gear in late August when Federal Reserve Chairman Ben Bernanke signaled that the central bank was prepared to stimulate the economy by buying government bonds. The $600 billion program didn't start until November, but speculators had already starting bidding up the value of[..]et classes like oil.

A further oil price spurt came in late November as it became clear that Congress was likely to extend for two more years tax cuts set to expire at the end of the year.

The Organization of Petroleum Exporting Countries is capable of raising output, if it needs to, by more than five million barrels per day. Still, Morgan Stanley estimates that the rising energy needs of China and other emerging economies will consume about half of that amount over the next two years. That could create supply pressures similar to those that preceded the price spike of 2008, when oil soared to $147 a barrel.

John Hofmeister, former president of Shell Oil and author of "Why We Hate The Oil Companies," predicts Americans will pay $5 per gallon for gasoline by 2012. Other experts say that's a long shot.

"That means oil close to $200" per barrel, analyst and trader Stephen Schork said. "We can see it, but we could also see a global depression, too."

In other Nymex trading Friday, natural gas for February delivery rose 6.7 cents to settle at $4.405 per 1,000 cubic feet. Unlike oil, natural gas prices are less than half where they were in 2008. That's due largely to the technological advances that allowed energy companies to unlock huge deposits in underground shale formations in the U.S.

Heating oil for January delivery rose 5.83 cents to settle at $2.5437 per gallon and gasoline for January delivery added 6.14 cents to settle at $2.4532 per gallon. In London, Brent crude increased $1.66 to settle at $94.75 per gallon.

Forecasters Predicting $4-a-Gallon Gas This Summer

January 05, 2011

McClatchy-Tribune News - Three dollars a gallon for gasoline may start to sound good by comparison this summer. With rising global demand for oil, gas could reach $4 a gallon in the coming months in some states, according to fuel forecasters.

That means flying, shipping a package and ordering a pizza could all grow more expensive as companies pass along their higher energy costs. Over time, those higher fuel prices will work their way into almost all consumer goods, from groceries to clothing, as items travel by truck, train or plane before reaching the store.

For a few months, the price will likely stay stable or drop a bit from $3 per gallon as people come off their longer holiday trips and hunker down in the winter, said Jessica Brady, spokeswoman for AAA in Tampa.

"Once we hit spring," she added, "you'll see those prices for crude oil and retail gas prices go up."

Average gas prices in Florida have been rising in recent weeks, topping $3 for regular last month. The state tends to hover right around the national average, Brady said. But with a relatively weak U.S. dollar, the relative price of crude oil is higher.

Gasoline expert Fred Rozell predicts that 15 states, including Alaska, Hawaii, Connecticut and Rhode Island, will see gasoline prices top $4 a gallon by Memorial Day.

"A dollar more per gallon isn't that much, probably about $750 more per year for each motorist, but there's a psychological aspect to gas prices," he said. "People are going to be up in arms about this."

Those higher oil prices have fattened oil company profits. Excluding BP PLC, the four other major investor-owned oil companies posted combined profits of $59.7 billion in the first nine months of 2010, a 49 percent increase from the year before.

The U.S. is the world's largest oil consumer, but prices since spring have been on a roll primarily because of rising demand in developing countries, especially China. China's oil consumption is expected to rise 5 percent next year; that compares with less than 1 percent growth forecast for the U.S.

Exxon Mobil Corp., Royal Dutch Shell, Chevron Corp. and Total SA are expected to earn $81 billion for the full year.

The fifth oil giant, BP, was held responsible for the largest offshore oil spill in U.S. history and booked $39.9 billion in charges related to the disaster. Excluding special expenses like the Gulf of Mexico spill, analysts say the company will still earn $20.2 billion in 2010.

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