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Pump prices could hit $4 a gallon this year

Saturday, January 1, 2011 | 9:16 p.m. CST

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.

Flying, shipping a package and ordering a pizza all likely would get more expensive this 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 $3.07 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, 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 such as 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.

 


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Comments

Mark Foecking January 2, 2011 | 12:23 p.m.

Good. Hopefully it will hit $8 or $9/gallon soon. Only then will we get a handle on our oil addiction.

Europe handled this decades ago with a fuel tax. They use half the fossil energy that we do, and have a comparable standard of living.

When are we going to wake up to reality?

DK

(Report Comment)
Paul Allaire January 2, 2011 | 12:30 p.m.

Hell did sort of freeze over a bit last night, but no awareness is in sight.

(Report Comment)
Louis Schneebaum January 2, 2011 | 10:03 p.m.

Unfortunately, Mark, the sprawling characteristic of our United States has rendered us more dependent than Europe, which isn't as large (and also wasn't designed largely by morons).

Even today, we continue to build the interstate focused, highway exit developments and their accompanying residential 'communities'.

(Report Comment)
Jack Hamm January 3, 2011 | 11:01 a.m.

@ Mark
We are addicted to cars not oil. Saying we are addicted to oil is like saying a heroin addict is addicted to needles. Oil is just the way we feed ourselves or addiction.

@ Louis

“Unfortunately, Mark, the sprawling characteristic of our United States has rendered us more dependent than Europe, which isn't as large”

This is a common excuse you hear from Americans; unfortunately it is not factually correct. Mainland Europe is about 4 million square miles; while the US is only about 3.5 million square miles. Moreover, we are only really concerned about the continental 48. If you take out Alaska (our biggest state by A LOT) and Hawaii the US is only 2.87 million miles; or about 70% of the size of the EU.

“and also wasn't designed largely by morons).
Even today, we continue to build the interstate focused, highway exit developments and their accompanying residential 'communities'.”

Now, this is true! Until we start planning our development better we are continue to have the same problems. The days of urban sprawl and the suburbs will be behind us soon whether it is by our choice or because global energy markets force us to.

(Report Comment)
Jack Hamm January 3, 2011 | 11:03 a.m.
(Report Comment)
hank ottinger January 3, 2011 | 11:05 a.m.

Picture's worth a thousand words. Thanks, Jack.

(Report Comment)
Paul Allaire January 3, 2011 | 12:05 p.m.

FLMAO

The thing I have noticed since it was last four dollars is more dwellers further from the center of the cities with bigger yards, bigger houses, bigger driveways, and bigger cars in them. Not necessarily better, but bigger, yes. Probably a higher proportion of riding lawn mowers, bigger than before, and the remaining proportion of the lawn mowers also bigger and more likely to be power propelled. Probably more weed eaters too. Also a continued increase in the ratio of trucks to cars and definitely an increase in the size of the trucks.
Of course, this is while the housing market is in a slump...

That our consumption is being dwarfed by other countries indicates a firmness in the prediction of higher oil prices. And the higher oil prices indicates a firming of the metal prices that skyrocketed late last year because citizens of traditional oil exporting counties invest heavily in metal. There are about a dozen other reasons for this. And now China is pushing metals as an investment to their general population who had been somewhat restricted by their government in that capacity a few years before. That country had been a strong exporter. And we know what they are now thinking of your currency...

Mark may get his wish sooner than I had just been thinking only a day or two earlier. Now I've got to think of what other impacts all of this is going to have...

Oh, wait... Maybe you can.

Now I do trust Obama not to freak out and try and do something radical to throw a monkey wrench in the direction of the world's economy. It might seem like a good idea for a second, or for a few select industries, but it would inevitably be bad, as we have seen previously. So let us hope that some people don't try to throw a monkey wrench into Obama.

And if you had read my writing on the tribune "news forum" so many years ago, you would know what I had been saying about all the "need for speed" in the automobiles we select. I think I even wrote some letters to the editor to that effect. I do note that Obama has introduced an almost too good to be true firming of the efficiency standards for automobiles, but I anticipate that some people in the industry will either fight it or fail it, probably both, as had been the case in the distant past. Consumers will likely make matters difficult, as has been the case almost exclusively. And I don't remember if the new kids on the block have vowed to fight those standards or not. I do see that they have vowed to fight any limits on greenhouse gases for utilities and industry. I do see that last year was the hottest on record...

I'm sure that the continued fighting in Afghanistan will ease this situation. (sarcasm intended)

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