Gasoline: $3 by Christmas and a 'Mini-Apocalypse' in Spring?

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gasoline pricesWith crude oil prices at the highest level in more than two years, holiday shoppers face the agony of $3-a-gallon gas this holiday season -- and much higher prices likely by springtime. "It now look as if December 2010 is probably going to be the most expensive month for gasoline in the U.S. since September 2008," says Tom Kloza, chief oil analyst at Wall, N.J.-based Oil Price Information Service.

Crude oil hit $90 a barrel on Tuesday, its highest point since 2008, when prices were plunging from that summer's high of $145 a barrel in the worst energy crisis of the last decade. Gas topped out at $4.11 a gallon, prompting people to sell their SUVs, buy gold and worry about the future.

Gas prices nationally now average about $2.95 for a gallon of unleaded regular, but they're already at $3.22 in New York, $3.21 in California and $3.02 in Illinois. Philip Verlger, an oil analyst at the University of Calgary who publishes The Petroleum Economic Monthly, says the current price spike was initially caused by a problem at a refinery in Nova Scotia that hit the U.S. East Coast first. "Gasoline prices went way up, and that pulled crude up," Verleger says. "Add to that the fact that it got cold, when heating-oil and natural-gas prices tend to go up, and they went up a little. That added $10 to the price of crude."

Kloza believes gasoline prices will hover around $3 a gallon until Christmas, and then drop back until spring. But then he expects them to surge dramatically, perhaps as high as $3.50 a gallon. "That will be a mini-apocalypse for a lot of people," Kloza says, adding that while the price increase will be painful, he doesn't think it will be long-lasting.

Soaring Diesel Demand in China


While U.S. gasoline demand is about the same as last year -- a recession year -- demand for oil and oil products such as diesel is increasing elsewhere, especially in developing countries like China, India and Latin American nations. "There is a perception that the world is using more oil than it is producing," Kloza says. "We've got huge stocks, but we're starting ever so slowly to draw down stocks."

In China at the moment, the government is trying to meet air quality commitments it made earlier this year. So, it has decreed a reduction in electricity production, which has caused a huge increase in demand for diesel oil from electricity users, Verlger says.

The U.S. has never had $3-a-gallon gas at Christmastime, reflecting the fact that gas prices typically get lower as the days grow shorter. Gas was at $3 for about six months in 2008 and for brief periods after hurricanes, but never in the winter months.

Verlger thinks oil prices may hit $3 later this year but then fall back a bit as demand for products such as gas and heating oil on the East Coast eases after Christmas. Says Verleger: "Products lead crude."

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imme534333

Tom- America will survive 2 more years of the Obama Presidency. The Democrats will follow the law in amendment 24. They will not attempt to impose a poll tax on voters.

December 17 2010 at 12:44 PM Report abuse rate up rate down Reply
tom moldthan

Is America going to survive 2 more years of Obama? Or are the Democrats going to use Amendment 24 and get him out sooner!?

December 14 2010 at 10:01 PM Report abuse -2 rate up rate down Reply
hi cat

I hope , with the help of Ron Paul we could constitutionally print our OWN money the way we did until the Jekyll Island coup d'etat. Forget gold. Tie the value to a precious commodity like wheat and or corn. The farmers will become valued again and hunger in the USA and probably in the world will be eliminated. Compare this common sense approach to what FDR and other progressives have done manipulating the economy and prices by DUMPING wheat,corn, milk and hogs(real wealth) into the sea!! And to hell with starving animals and humans! Go for it. We don't need anybody with all the God given resources here in America and that includes oil and gas.

December 14 2010 at 8:32 PM Report abuse +1 rate up rate down Reply
flyingwisconsin

It is true that the President directly affects the economy and the last 2 years certainly have proved that,lets hope we all can survive until he is gone!

December 14 2010 at 9:02 AM Report abuse -2 rate up rate down Reply
beltontheass

new york and california have the highest prices, cause it is a conspiracy to keep the people there, i didnt say residents, cause there are so many illegals, i said residents, if they dont stay, the crime would decrease, and then some fat derriere cop, some ethnic lazy ass nurse and some other person of questionable nature and bad morals would have to get layed off, then they too might leave, and if it was a cop or a large nurse, then a donut shop employee would get layed off, then a lard farmer might feel the pinch, eventually, it would only be actors and actresses living in belair, malibu and beverly hills, then who would do the gardening and cleaning blah, blah, blah

December 13 2010 at 11:44 PM Report abuse -1 rate up rate down Reply
frogheaven

I believe that the BP oil-spill in the Gulf, earlier this year, kept the oil companies from doing their usual "vacation-time" increase in gasoline prices ("just 'cause they can!"), out of fear of a missive reolt on the part of American consumers affected. and potential reprisals from the US government! Now? They're just trying to "balance out" their profits for the year! As we are in such dire straits economically here,... any chance of a "boycott", via, car-pooling, tele-commuting, etc?? Any ideas??

December 13 2010 at 9:34 PM Report abuse +3 rate up rate down Reply
1 reply to frogheaven's comment
frogheaven

that would be "massive revolt"... sorry, I can think, but not type!!

December 13 2010 at 9:39 PM Report abuse +1 rate up rate down Reply
cancunfred

Iraq oil needs to be $90+, for the country to escape Ch7 UN Bankruptcy. In order to be accepted into the WTO(World Trade Org.), as a new democracy, this week, at the UN by Biden, on Wed. Iraq will also ReValue its NEW Currency, based on the Needed $90 oil prices. Their budget demands $73 to minimally function for 2010/2011. Iraq is making its debut as a world oil producer and player as a democracy and as Bush said, Iraq will pay back The USA for the war and the cost of Freedom. Watch the Internet, not the news. Fred Coffin I

December 13 2010 at 5:52 PM Report abuse rate up rate down Reply
ariddick57

These comments consist of the same tired posturing and complaining. Instead of whining about the problem find a solution as consumers. Case in point, South Africa has been creating gasoline,diesel fuel and jet fuel OUT OF COAL for over 20 years! This tech has existed since 1920! And was used during WWII by the Nazis! Cost per gallon after expenses/operating costs? $1.85! A company in Philly PA produces diesel/light crude from any item comprised of carbon{aka garbage}. Stop your belly aching and fight back anyway you can. Form a consortium to build a solid to liquid reactor. If every person and company that uses diesel/gasoline invested $20 this facility could be built in 2yrs. Thus beginning a journey to true independence from OPEC, this fuel would be sold only in the domestic market. OPEC isn't going to give us a discount, so Americans need to worry about themselves. Grow a pair for God's sake!

December 13 2010 at 2:33 PM Report abuse +4 rate up rate down Reply
1 reply to ariddick57's comment
sixpackinwilson@

I'VE GOT MY $20 LET'S DO THIS I'M SICK & TIRED OF ALL THEIR BULL-GRAP

December 13 2010 at 8:06 PM Report abuse +2 rate up rate down Reply
walkin07

The first thing we need to do is outlaw speculation on necessary commodities on Wall Street: everything they rush on (Oil, wheat, corn, etc) goes up and never comes back down. This is where stimulus money should go--make the basics affordable.

December 13 2010 at 1:17 PM Report abuse +3 rate up rate down Reply
SAM

As if tax breaks for the rich are really needed. Thanks to the Republicans ... these guys just keep lining their pockets more and more. It's always the same bull **** ... raise prices in the winter when you have to heat your house and jck it up again in the summer when you want to take a little vacation. In the end the rich get richer and the poor get poorer.

December 13 2010 at 10:38 AM Report abuse +5 rate up rate down Reply