Message to consumers-Hubbert’s Peak may be real but do not worry-for now

Gallon of gas might hit… $2.50 Experts: Global demand driving up cost

By WILLIAM BUNCH

bunchw@phillynews.com

Talk about highway robbery.

Gasoline prices are about to go through the moon roof, with some experts saying that average prices could go as high as $2.50 a gallon this summer, the peak driving season.

Fuel-watchers say the main culprit is global demand, which briefly pushed the price of a gallon of crude oil as high as $55 a barrel yesterday. That’s the highest level since last October – except this time the experts aren’t so sure the prices will retreat the way they did in the fall.

“This is especially bad news for consumers, given the fact that gasoline prices have risen from early March to the middle of May in 19 of the last 20 years,” said energy analyst Peter Beutel of Cameron Hanover Inc.

Over on the Web site phillygas prices.com, where local drivers post information – and often rant – about the cost of fuel, the motoring public is not pleased.

Two weeks ago, a Philly poster named SLU2 said the cheapest gasoline he could find was $1.89 a gallon. “Guess I’ll have to travel over the bridge on fumes this summer while going down the shore to save big bucks,” he complained.

Now, $1.89 a gallon sounds pretty darned good.

Here are some questions and answers about our newest energy crisis.

Q. Why is this happening?

A. Even seasoned energy traders have been taken aback by the steep rise in crude-oil prices this week. Typically, the cost of crude is about 50 percent responsible for what you will pay at the pump.

Financial markets are often irrational, and crude oil is no exception. Some experts believe that the spike – crude futures are up $10 a barrel since the start of the year – is partly the result of speculation by hedge funds and others.

That said, the increasing thirst for gasoline from the world’s emerging economies – especially China – is also creating a text- book case of supply and demand. What’s more, oil is traded in dollars, and with a sharp plunge in the dollar’s value recently, the world’s producers are more worried about cash flow than oil flow.

Q. So give me the bad news – how high is it going to go.

A. Well, the average pump price nationwide is $1.93 a gallon, although many stations in the Philadelphia area are charging more already. Many experts think that prices, now significantly higher since the start of 2005, will increase by another 25 cents a gallon in the immediate short-term.

Yesterday, several energy analysts predicted $2.50 a gallon by summer.

Q. Will there be long lines at gas stations like in 1973-74?

A. Probably not. In fact, the nation’s oil refiners recently reported that their reserves are 8 percent higher than this time last year, but that their price is captive to the global market.

Q. Can’t OPEC (the Organization of Petroleum Exporting Countries) do something?

A. Yeah, right. Yesterday, OPEC’s acting secretary was quoted as saying it’s possible that oil could rise to $80 a barrel at some point in the next two years. That would equal – when adjusted for inflation – the all-time highs of 1980-81, when the economy was struggling to get out of recession.

Q. I guess a war wouldn’t help things, either.

A. No. Yesterday, a leading Iranian official suggested that his nation – if attacked by the West – would likely blockade the Straits of Hormuz, where 40 percent of the world’s oil passes.

Q. I’m more worried that the world is running out of oil. Could this be happening?

A. Well, it’s the subject of a raging scientific debate, but some respected experts do believe the world is either at or near its peak in oil production. They say the formula that predicted to the year (1970) when American production would decline – known as Hubbert’s Peak – shows the global oil peak is taking place this decade, and may have happened already.

Global oil use is expected to reach 84 million barrels a day this year. A survey showed daily production in January averaged just 83.6 million barrels.

Q. I’m not even going to worry about that. Where can I get cheap – er, cheaper – gas today!

A. According to phillygas prices.com, these are the stations that had the lowest prices yesterday. (Caution: Prices are posted by volunteers and may have already changed since the time of observation.)

The two lowest: Hess, 1350 Admiral Wilson Blvd., Camden, and BP, 5252 Marlton Pike, Pennsauken, both $1.75. Five stations in Pennsylvania – mainly in the outer Western suburbs – were reported selling gas for $1.83.

http://www.philly.com/mld/dailynews/news/local/11048105.htm