5 Reasons We'll See $4-a-Gallon Gas by Memorial Day By Kyle Woodley, InvestorPlace Assistant Editor

No one will throw a ticker-tape parade about fuel prices as long as gas is above $3, but drivers probably did at least a little less complaining at the pump in the latter half of 2011. That's because fuel prices actually were dropping at a pretty good clip -- around 20%, down to about $3.25 -- since they spiked to around $4 last spring.

Hope you enjoyed it while it lasted.

Fuel prices have been back on the rise ever since Baby New Year shook his 2012 rattle, and are already back up around the $3.50 mark, with plenty of room to go higher. Tom Kloza of the Oil Price Information Service told USA TODAY he expects the average price at the pump to hurdle the $4 mark by May, and a slew of factors could prove him right.

Here are five reasons why we'll see $4 gas by Memorial Day:

1. Improved U.S. economy: Unemployment is down to 8.3%, and the U.S. economy is showing a little spring in its step. No full-blown recovery, but when things are looking up, people start to spend -- including on travel. Several surveys show 2012 is primed for increased traveling, and when more planes, trains and automobiles get running, you get higher demand for gas.

2. Global Demand: Of course, while we're piddling around at home, parts of the rest of the world are really growing. China's overall fuel imports for 2011 were up "only" 6% from 2010 after the previous year's 17.5% growth. Goldman Sachs (GS) expects China to overtake the U.S. as the No. 1 oil importer by 2013, and India, already among the world's top five oil importers, is only getting bigger.

3. Seasonality: Think summer's the worst for gas prices? Wrong -- at least sometimes. While summer traditionally sees the highest gas prices, fuel also has spiked around late April/early May, including during the past two years. Some of the price run-up comes from annual refinery maintenance. According to AAA spokeswoman Jessica Brady (via the Atlanta Journal-Constitution), refineries across the country begin shutting down in February and March to switch production from a winter fuel blend to the pricier summer fuel blend, which also puts upward pressure on gas prices.

4. Tensions with Iran: It's still a big "if," but the standoff between Iran and the U.S. and Europe over Iran's attempts to produce nuclear weapons could become one of the single-greatest upward forces on gas prices. Iran has responded to sanctions against its oil exports by threatening to close the Strait of Hormuz - a narrow waterway through which 20% of all globally traded oil is transported. Iran recently conducted military exercises near the strait, and Britain has said it could send extra military forces to the area to deter a blockage.

But should the strait be closed for business, you'll know about it within an hour, according to Duquesne University professor Kent Moors. In an interview with Marketplace.org, Moors said crude oil prices would jump $10 to $15 per barrel -- and gas prices jump between 30 cents and 40 cents per gallon -- "almost immediately."

5. Oil Takes More Work: There's a reason the word "fracking" has quickly entered the vernacular. Oil players of various sizes -- from Exxon Mobil (XOM) to Kodiak Oil & Gas (KOG) -- are tapping into North Dakota's Bakken Shale through the costly process of hydraulic fracturing, and while fracking costs are on the downswing, it's still a more expensive process than traditional drilling.

Oil companies also are accelerating their efforts in tar sands and deepwater drilling -- also pricey endeavors. And until these methods become more economical, energy companies need high oil prices to help finance production. Add it all up, and the chances for sub-$4 gasoline after Memorial Day seem mighty slim.

Kyle Woodley is the assistant editor of InvestorPlace.com. As of this writing, he did not hold a position in any of the aforementioned securities.



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mshaw54130

I believe the reason for high oil prices is the oil traders.Before you say "Duh" think about it. There are more millionare politicans then ever before! I think they are rideing the oil gravy train so don't expect any relief from them in an election year or any other for that matter. Greed rules and don't expect fiscal sense from anyone who would spend hundreds of millions of dollars to get a job that pays 400k per year. Think our system is messed up?

February 21 2012 at 6:30 PM Report abuse rate up rate down Reply
mshaw54130

I believe the reason for high oil prices is the oil traders.Before you say "Duh" think about it. There are more millionare politicans then ever before! I think they are rideing the oil gravy train so don't expect any relief from them in an election year or any other for that matter. Greed rules and don't expect fiscal sense from anyone who would spend hundreds of millions of dollars to get a job that pays 400k per year. Think our system is messed up?

February 21 2012 at 4:50 PM Report abuse rate up rate down Reply
hgeorgech

Here's reasons 6, 7, 8 ... and so on ...

The USA is an EXPORTER of gasoline, heating oil, diesel fuel and jet fuel ... brought about by a SURPLUS of petroleum here due, in part , to REDUCED demand for heating oil (down 10% due to mild winter) + REDUCED gasoline consumption (due to less driving and more fuel efficient vehicles). That said, we, at preseent, cannot use - domestically, all of the refined petroleum products we produce.

The USA, Canada and Mexico (combined) produce 82-85% of the USA's petroleum needs; we import 10-12% from OPEC. The USA produces about 48% .. Canada being our biggest "import" source of petroleum. OPEC is way down the list but seems to drive global price levels (artificially)

There Is NO supply and demand deficit of petroleum in the USA .. the North American producers - alone can - and do - supply more than what we now consume.

The proposed Keystone pipeline, while it would provide thousands of jobs (most of those in Canada), would bolster oil production and refinery processing in the US' Gulf area which, primarily, would be EXPORTED, not consumed here in the USA

Bottom line, the REAL reasons why gasoline may hit $4 - $5 a gallon are:

6. Greed by the Oil Companies for excess profits and shareholder dividends with a wink and a nod by those in DC

7. The Government's passion to invest billions of our $$ on alternative fuel technologies

8. DC's seemingly "looking the other way" and blaming continual unrest the Middle-East!!

When is the last time we have seen the US "Energy Czar" address US energy production, consumption and lay out what our Energy Plan is? Answer: Never .. why not? He should report monthly to the American public. He and his Canadian and Mexican counterparts.

GOAL: e.g. Complete energy independence for North America - 2020. Unless you set and commit to a goal, you'll never reach it!

Conservation of fossil fuels is wise ... start doing so by having all new large trucks and all US postal vehicles run on natural gas by 2020. That, alone would MORE than wipe out any need at all for OPEC -supplied petroleum for North America - period. Let OPEC sell their petroleum to India, China, Japan, Europe ...

North America can and should be totally self-sufficient re: petroleum production, refinery processing and delivery - that plus expanded use of our vast reserves of natural gas should enable North America to be energy independent for the rest of the century .. and beyond.

Sure, continue research on practical energy alternatives (e.g. electrics, fuel cells, hydrogen, etc) - any REAL cost-effective success with those will only add to energy independence.

We're being had, folks ...

February 21 2012 at 12:24 PM Report abuse +1 rate up rate down Reply
gmydogbud

The American People have No One To Blame But Themselves. They have allowed all these Environmentalists to run our government! Then voted for "Home & Change" - so - now that we have been left with only change in our pockets - we have no one to blame but ourselves!!

February 21 2012 at 11:16 AM Report abuse rate up rate down Reply
1 reply to gmydogbud's comment
vincy70097

Your statement seems to ignore the real facts stated in this article. Don't spill out your ignorance based on your political prejudice. You are not fooling us.

February 21 2012 at 12:45 PM Report abuse -2 rate up rate down Reply
COMMON SENSE

Five Reasons we will see high gas prices in America? because one man is stopping us becoming independent of the Muslim countries that sell us oil.
1. Obama 2. Obama 3. Obama 4.Obama 5.Obama 6 Obumer

February 21 2012 at 10:09 AM Report abuse rate up rate down Reply
1 reply to COMMON SENSE's comment
vincy70097

You sound like a real fool.

February 21 2012 at 12:46 PM Report abuse -2 rate up rate down Reply
COMMON SENSE

Five Reasons we will see high gas prices in America? because one man is stopping us becoming independent of the Muslim countries that sell us oil.
1. Obama 2. Obama 3. Obama 4.Obama 5.Ombama

February 21 2012 at 10:08 AM Report abuse +1 rate up rate down Reply
Steve

All the interesting uninformed comments. I will answer this once, The answer is GREED! We have a bigger supply than we have had in the last 20-25 years and we are using less fuel, with more efficient cars, and yes driving less for the most part during the last five years. Drilling etc, and all that is right wing 1% propaganda to fool the 99% into thinking that is the problem, much like the temporary tax cuts for the top 1% create job growth. We all know how that worked the last ten years. LOL
All of the leading economists and independent experts agree you invest, yes invest in the economy to stimulate the growth, not cut programs or taxes on those who can afford to contribute in our nation's time of need, just as we all contributed in WWII and other times in our nations history when the country needed help. Otherwise, the cutting government job programs and taxes will put us on the road to follow Europe's decline and economic collapse. We do not need to go back to that route which we know does not work! Fuel is abundant in the United States, in fact so much so that we export fuel! Wake up, learn the truth and stop being so naive. Blaming Obama is silly. Did you blame Bush when the gas flew up past $4, per gallon and the oil giants made record profits? Really now. Here in NYC our gas is past $4 per gal and it is terrible hurting all costs, food, transportation, etc and slowing the recovery. That is why we need higher fuel, better efficiency, green alternatives too, to all be pushed. We must all come together as a nation and support our country and each other. GO AMERICA!

February 21 2012 at 1:08 AM Report abuse rate up rate down Reply
Steve

All the interesting uninformed comments. I will answer this once, The answer is GREED! We have a bigger supply than we have had in the last 20-25 years and we are using less fuel, with more efficient cars, and yes driving less for the most part during the last five years. Drilling etc, and all that is right wing 1% propoganda to fool the 99% into thinking that is the problem, much like the temporary tax cuts for the top 1% create job growth. We all know how that worked the last ten years. LOL All of the leading economists and independant experts agree you invest, yes invest in the economy to stimulate the growth, not cut programs or taxes on those who can afford to contribute in our nation's time of need, just as we all contributed in WWII and other times in our nations history when the country needed help. Otherwise, the cutting government job programs and taxes wiull put us on the road to follow Europe's decline and economic collapse. We do not need to go back to that route which we know does not work! Fuel is abundant in the United States, in fact so much so that we export fuel! Wake up, learn the truth and stop being so niave. Blaming Obama is silly. Did you blame Bush when the gas flew up past $4, per gallon and the oil giants made record profits? Really now. Here in NYC our gas is past $4 per gal and it is terrible hurting all costs, food, tranportation, etc and slowing the recovery. That is why we need higher fuel, better efficiency, green alternatives too, to all be pushed. We must all come together as a nation and support our country and each other. GO AMERICA!

February 21 2012 at 1:06 AM Report abuse rate up rate down Reply
Steve

All the interesting uninformed comments. I will answer this once, The answer is GREED! We have a bigger supply than we have had in the last 20-25 years and we are using less fuel, with more efficient cars, and yes driving less for the most part during the last five years. Drilling etc, and all that is right wing 1% propoganda to fool the 99% into thinking that is the problem, much like the temporary tax cuts for the top 1% create job growth. We all know how that worked the last ten years. LOL All of the leading economists and independant experts agree you invest, yes invest in the economy to stimulate the growth, not cut programs or taxes on those who can afford to contribute in our nation's time of need, just as we all contributed in WWII and other times in our nations history when the country needed help. Otherwise, the cutting government job programs and taxes wiull put us on the road to follow Europe's decline and economic collapse. We do not need to go back to that route which we know does not work! Fuel is abundant in the United States, in fact so much so that we export fuel! Wake up, learn the truth and stop being so niave. Blaming Obama is silly. Did you blame Bush when the gas flew up past $4, per gallon and the oil giants made record profits? Really now. Here in NYC our gas is past $4 per gal and it is terrible hurting all costs, food, tranportation, etc and slowing the recovery. That is why we need higher fuel, better efficiency, green alternatives too, to all be pushed. We must all come together as a nation and support our country and each other. GO AMERICA!

February 21 2012 at 1:05 AM Report abuse rate up rate down Reply
BIG DADOO

Is it just me or is anyone else thanking President Obama every time you fill your automobile with gas? Did he not say we should be paying five dollars a gallon, when he was running for President?
Did he not suspend exploration in our Gulf. Did he not stop the auction of land leases for exploration in the Midwest? Did he not stop the Keystone pipeline? Well, I have suspended my non-essential driving. I have stopped our routine driving to shop, go out to eat or visit friends. It reminds me of the scene from Animal House: "Thank you President Obama, may I have another increase".

February 20 2012 at 10:07 PM Report abuse +2 rate up rate down Reply