‘Fuel apocalypse’ to come: Gas could top $3.75 by spring, analyst says


Today’s gasoline prices, while higher than normal for this time of year, could end up looking cheap come springtime, says one prominent oil analyst.

Pump prices nationwide for regular unleaded could hit an average of $3.25 to $3.75 a gallon early next year on higher crude oil prices and a seasonal rise in gasoline demand, Tom Kloza, senior oil analyst with the Oil Price Information Service predicts.

“My view of 2011 suggests that we are looking at the second fuel price apocalypse of the 21st century, commencing during a time line that will begin with spring training and end when the Cubs are written off as a baseball non-contender,” Kloza writes.

As for whether U.S. pump prices will reach an average of $3 a gallon before the end of 2010, he says it could go either way.

The national average retail price for regular unleaded held overnight at $2.98 a gallon, while the Houston average rose a fraction of a cent to $2.80 a gallon, according to AAA’s Daily Fuel Gauge Report.

The national average has not surpassed $3 in more than two years, and has never hit the $3 mark in December. The all-time record is $4.11 a gallon, set in July 2008.

Prices will begin to rise early next year amid a surge of money moving into oil futures from investors anticipating the typical springtime rise in fuel demand, Kloza  observes.

” The spring move will be helped in part by fundamentals, but money flow is the performance-enhancing drug for prices,” he writes.

Photo: David Zalubowski/AP

Categories: Social
Brett Clanton

24 Responses

  1. Dollar says:

    Speculators are investors. There are as many speculators losing their rears as making money. For every investor on one side of an oil futures contract who thinks the price is rising, there must be another on the other side who thinks the price is falling.

    The market has its own way of working out excesses.

    Oil is a commodity, always will be, and producers must have the ability to hedge their production. Speculators play a necessary role in providing volume to allow for true price discovery.

    Large price swings occur when true supply/demand are very tight. Speculative demand is a very real concept in price discovery.

    The price is currently well above what producers need to continue deep water exploration.

    Current slowdown of drilling in the GOM will not impact price for another couple of years, until current production begins depleting. I’ve no read no one from the oil and gas industry say anything to the contrary. It will impact price, but its not impacting the current price.

    And if you studied economics in college, you should know that inventory and supply are two separate concepts. Inventory is a number. Supply is a curve. And supply does not equal inventory, supply equals the amount of an inventory available for sale.

    The price of oil is what it is.

    And I have no doubt the current president and all the greenies, love to see this rise in price. Anyone with an anti fossil fuel agenda is very happy to see the price rise.

  2. Bob Johnson says:

    I dropped my 11 mpg 4×4 for a 30 mpg Toyota two years ago just to see the prices moderate (if $2.50-$2.80 is moderate) but the next several months will pay me back. Mostly the higher prices will fuel (pun intended) the sale of high economy vehicles, especially all the new high milers coming to market. It will also work to reduce demand and continue the newly reported drop in consumption. It looks like to me that we have passed the tipping point in our consumption of refined oil and it will be interesting to see what the numbers are in 5 years.

  3. yonny says:

    The speculation in commodities is beginning. As mentioned here in the comments, it needs to be removed from the Commodity Market. Wall Street has been on a tear but have bottomed out on many investments. To restore the excitement they will move into commodities. Oil is the biggest target and has a huge impact on our economy. With increased trading will come the rampant speculation and the price swings. Also, as mentioned in the comments, use of refined products is down. The slow down in the Gulf is not really affected by the new permitting process as much as the O&G industry would want you to believe. The price is not there to justify further or continued exploration and production. Diminishing supply will be in play.

  4. Hunter Henry says:

    1. Can we have a serious discussion without all the democraps and repugnicans blaming each other? Do you know how stupid you all sound? You are both wrong, both your parties ran this country for the last hundred years, it’s not like all the bad stuff just happened recently. Both parties and all you die hard partisans are to blame. Now stop saying ridiculous things, and show yourselves to be what you truly are: dumbbutt politicians/partisans.

    2. To the heart of the matter: The economy has barely started back up, the recession is still lingering, and already the oil industry and Wall Street are starting to speculate on shortage, and manipulate prices. Instead of seeing through these a$$holes for what they are and what they try to do, i.e. manipulating everybody to make a buck, you guys are playing right into their hands, blaming each other. Shame on you!

    3. As for this analyst, whose title is fitting (anal-yst), he said things like “well, price could go either way”, which shows you how much he really knows. Got it?

  5. Sharky says:

    Immigration control: FAILURE
    Keeping fascism in check: FAILURE
    Intelligent urban planning: FAILURE
    Energy policy: FAILURE

    Feel free to keep adding to the list….or simply parrot the obnoxious Coke vs. Pepsi rhetoric that the parties responsible distract the “American” public with.

  6. Don says:

    who do you think got us into the housing financial crisis? It wasn’t GW, it was your old pal Clinton and Barney Frank, the head of HUD. They are the ones that deregulated HUD to the point they would give loans to anyone with a pulse.
    Hey Mark, I think the bank barron and other identities like Sallie Mae which is a private shareholder-owned company got us into housing financial crisis. I also blame the politicians dirt bag getting rich by numerous Special interest groups, lobbyists. Stick to the subject matter “oil” and “gas”.

  7. chiefdecoy says:

    Jim Bowie,,,,
    Do you keep up with inventory reports?
    What part of bloated gasoline, and crude supplies, are you, and other yahoo’s screaming about “conserving”, NOT comprehending???
    The artificial price of oil has nothing to do with supply/demand.
    Also, interesting to note, that the dollar had made gains against the Euro, and others over the past couple of weeks. (seems that the value of the dollar weakening is ONLY an excuse to drive the price up. When it gains, it seems not to reflect in the opposite direction)……
    Where is our President on this developing economic disaster?
    If the price of gas continues to escalate, the overall economy will weaken again, as a result….

  8. Expunge says:

    You guys have no idea why the price of oil is going up. Their are three major factors for the price of oil being where it is at.

    First our weak dollar. The amount of debt this country continues to rack up and the Fed buying 600Bil of treasury notes (ie printing an additional 600Bil with nothing behind it) severely undermines the value of the dollar.

    Second our idiotic President and his gulf coast moratorium and the lack of opening up additional reserves to exploration makes the US (the largest consumer of oil) who imports over 70% of the oil it uses a slave to market forces.

    Third and last China. China and India to a lesser extent are now usuing significantly more oil which drives up demand and to further add pressure to commodities, China is manipulating its currency which is causing all kinds of issues on the free markets.

    Until one of those three factors are address prepare for oil to continue to rise. When one of those three factors are addressed oil will stabilize.
    If two out of three of the factors are address you might see oil back down under $50 a barrel.(which at this point I doubt will occur unless the global economy goes into reverse.)

    My 2 cents from someone that has worked for oil companies for the last dozen years or so..

  9. Firmgrip says:

    Jim Bowie said it right to the point. These oil analysts must be in bed with Big Oil. What we need is more infrastructure to support Natural Gas (CNG)vehicles and a move away from refined products for vehicles all together.

  10. Brian Williams says:

    The price rise has nothing to do with politics and everything to do with demand. As long as we insist on driving a 6 litre V8 to the grocery store demand will increase. High prices may be the only way to wean America of imported oil. Electric cars won’t do it, more ethanol will make it worse, mandating better fuel economy won’t do it, politicians dont have the you know what to do it, only the almighty dollar can reduce demand.

  11. R. Salazar says:

    Aside from all of your republican and Obama accusations, has anyone except Marc stopped to think that this is a byproduct of speculation, supply and demand’s path to equilibrium, and the fact that gasoline (as a product of fossil fuels) is under the ticking clock of depletion? I think I expect too much from people that can read sometimes.

  12. rbmeoe says:

    Basically, what they are saying, is that due to the slowed economy, and that people are using less fuel, oil companies, needing to keep the standard of living for their executives at a high level, will be raising fuel prices to garner that extra money. They don’t want to look like a bunch of Scrooges by doing it in December, so they will wait for spring when more people will be unable to afford the price gouge when they want to use more fuel when the weather improves!! This price control by oil companies is a bigger scam than any Ponzi scheme!! Oil prices should never have risen above $1 per gallon!! Only because of oil companies and oil traders greed, does it get so high! Evidence is that it didn’t stay near $4 a gallon. People became so outraged and stop using oil, the oil companies saw thier money train leaving, so they lowered the price. Now they want to see if they can raise it again, only more slowly so as not to raise such a stink from the consumers!!! Well, their not getting it from me!! I’ll keep riding my ’82 Honda motorcycle that gets 60+ mpg and costs me about $6 per week to fill-up. It may start costing $12 a week, but that’s a lot better than the $50+ it costs to fill my Honda Accord!!

  13. CYFAIRDOG says:

    Old smoker is on target. The big banks are playing in the commodities market in order to beat the inflation that is certain to follow the deficit spending that both parties are pushing through. That kind of speculation exacerbates the natural supply and demand effects of the market by simulating demand. The profit for these investment firms comes from consumers of products made from those commodities. JP Morgan bought one billion dollars worth of copper a few weeks ago, sending the price per pound from about $3.80 to $4.20. You can bet the same thing is happening in oil.

  14. Ringo says:

    Interesting the amount of space devoted to defending Obama on this one. Not that it matters; this is a “progressives” dream come true; watching the acceleration of the demise of the American middle class and the potential for forcing many who would otherwise never be interested in electric vehicles into seriously considering them. And if progressives are really lucky, the gas prices will go even higher resulting in reluctant buyers having to separate themselves from their hard earned dollars to actually buy the eltrojunk. And of course if that is the case then it’s sure to be true that many millions of dollars will make it’s way to the Democrat constituency at the UAW that builds the Chevy Volt. Isn’t that convenient. Actually, the more I think about this, the more “convenient” this seems to be for the Progressive Democrat party. I don’t suppose the gas price rise has any thing to do with screw tightning by the EPA?????? Nah, no one would think of that.

  15. MarcS says:

    Republicans own Texas and dictate national policy at this point. Republicans are also naturally tied to oil companies (just as you can say Democrats are tied to their own special interest groups). The result of voting in the “Oil Party” this last election is that Oil is about to get a big payday. No surprise at all.

  16. old smoker says:

    now is the time for a beat down on the Wall Street gamblers who are behind the insane run up in the price of oil. the run up has nothing to do with Washington or the oil companies, only the modern day version of the Enron robbers.

  17. Mark says:

    December 20, 2010, 11:23 AM
    I blame the crazy “Republican” causing this mess. This problems have been existed since Bush was in office.

    Hey Don, who do you think got us into the housing financial crisis? It wasn’t GW, it was your old pal Clinton and Barney Frank, the head of HUD. They are the ones that deregulated HUD to the point they would give loans to anyone with a pulse.

  18. Jody says:

    “second fuel price apocalypse of the 21st century, commencing during a time line that will begin with spring training and end when the Cubs are written off as a baseball non-contender” so, June 1st.

  19. Marc says:

    Rocknocker – This is a function of speculation. Obama’s policies have had virtually no effect on the price or supply of oil in relation to current demand, but it’s easy to believe the stupid oil company propaganda spoon-fed to the weak-minded then it is to use just a modicum of reason. And we can blame anti-Obama sentiment, in this case, as sheer stupidity.

  20. RocketsFaninDallas says:

    No, you can blame Republicans for killing the derivatives reform legislation that would prevent this type of speculation that drives the price of all commodities up – including oil and food.

  21. Don says:

    I blame the crazy “Republican” causing this mess. This problems have been existed since Bush was in office.

  22. Jim Bowie says:

    This is just another attempt of the oil companies to pad their earnings because of the halt in drilling which lowers it. I think the public should be proactive and find ways to decrease the demand for gasoline and let this prediction hit the oil companies smack in their faces!

  23. Bleach says:

    No Rocknocker, we do not have Obama to thank. No one that knows anything about the oil business will confirm your statement. Your statement is yet another example of our education failing us.

  24. Rocknocker says:

    We can than the obama administraiton for this hike in oil prices because of the moratorium on drilling and the subsequent delays in issuing permits.