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Oil & Gas Prices Reach New Highs - But Could Go Much Higher
March 11, 2008 02:00 PM
by
findingDulcinea Staff
U.S. gas prices broke another record this week, hitting an average of $3.22 a gallon. Some experts believe oil prices could go significantly higher.
30-Second Summary
Oil prices rose to $108 a barrel Monday and analysts predict $110 a barrel or higher is possible, “given that the usual rules of supply and demand aren't driving the oil-price party train,” writes the Los Angeles Times.
Oil, a global commodity, is traded throughout the world in dollars, and the dollar is dropping in value, causing prices to rise in dollar terms.
The Goldman Sachs Group Inc. analyst who predicted a $105-a-barrel spike back in 2005 has a new prediction: oil as high as $200 a barrel due to “a future rebound in U.S. gross domestic product growth or a major oil supply disruption.”
And the surge comes just months before the summer driving season, which could push prices even higher.
Some believe rising oil and gas prices in recent years could be a symptom of a bigger problem with dire consequences.
The term “peak oil” refers to energy resource depletion as a result of the peak in global oil production. Oil is a finite resource, and some theorists believe that its peak production has passed and can only decrease from now on.
In 2005, multi-billionaire investor Richard Rainwater predicted a rapidly approaching peak oil crisis, and invested heavily in the oil sector.
“But there may be something more important than making money,” he said in a Fortune magazine story. “This is the first scenario I've seen where I question the survivability of mankind.”
Oil, a global commodity, is traded throughout the world in dollars, and the dollar is dropping in value, causing prices to rise in dollar terms.
The Goldman Sachs Group Inc. analyst who predicted a $105-a-barrel spike back in 2005 has a new prediction: oil as high as $200 a barrel due to “a future rebound in U.S. gross domestic product growth or a major oil supply disruption.”
And the surge comes just months before the summer driving season, which could push prices even higher.
Some believe rising oil and gas prices in recent years could be a symptom of a bigger problem with dire consequences.
The term “peak oil” refers to energy resource depletion as a result of the peak in global oil production. Oil is a finite resource, and some theorists believe that its peak production has passed and can only decrease from now on.
In 2005, multi-billionaire investor Richard Rainwater predicted a rapidly approaching peak oil crisis, and invested heavily in the oil sector.
“But there may be something more important than making money,” he said in a Fortune magazine story. “This is the first scenario I've seen where I question the survivability of mankind.”
Headline Links: Oil and gas prices soar
Oil and gas prices may seem high now but analysts project prices could go much higher, including one who projects a seemingly unbelievable $200 a barrel for crude oil. The Los Angeles Times reports, “Oil is responding to the weakening U.S. dollar, the currency in which oil is traded.” Californians have it the worst in the current gasoline price spike, with a current average of $3.537 a gallon. Residents are worried about gas reaching the $4 a gallon mark.
Source: The Los Angeles Times
Gasoline prices are soaring at an average of $3.22 a gallon, and just before the summer driving season when prices could be pushed even higher. Meanwhile OPEC President Sheikh Ahmed Fahd al-Ahmed al-Sabah has said prices may remain in the triple digits for some time, although some analysts argue otherwise, reports NPR.
Source: NPR
Reference: Peak oil
Investor Richard Rainwater predicted a peak oil crisis in 2005 when he realized he had a too-good-to-be-true opportunity to invest in oil, which we may have a shortage of in the future. He concluded that the oil crisis was “more important than making money.” Rainwater scanned news headlines, blogs, met with other peak oil theorists and issued news alerts of his own, fearing that America will not be ready for the shortages and price surges that dwindling oil supplies will cause.
Source: Fortune magazine
The Government Accountability Office issued a report on peak oil in 2007 entitled “Uncertainty about Future Oil Supply Makes It Important to Develop a Strategy for Addressing a Peak and Decline in Oil Production." The GAO stated that estimates for the peak's timing varied from immediately to 2040. The GAO noted that the federal government has "no coordinated strategy for reducing uncertainty about the peak's timing or mitigating its consequences."
Source: The GAO
The peak oil-related blog “Life After the Oil Crash” begins with the disclaimer “Civilization as we know it is coming to an end soon.” Matt Savinar, who writes the blog, goes on to say that he is not describing a conspiracy theory or biblical apocalypse, but reporting on data from geologists, physicists, bankers and investors on the severe implications of peak oil. “The issue is not one of ‘running out’ so much as it is not having enough to keep our economy running,” Savinar writes.
Source: Life After the Oil Crash
What does ‘peak oil’ mean?
When a well’s oil production is plotted on a graph against time, the bell-shaped parabola that is produced is called the Hubbert curve, after U.S. geologist M. King Hubbert. In 1956, Hubbert accurately predicted that the production of oil in the United States would peak between 1965 and 1970.
The Energy Bulletin provides a “Peak Oil Primer” answering the questions “What is peak oil?”, “What does peak oil mean for our societies?” and “So when will oil peak globally?” The primer cites a U.S. Department of Energy report that says since the 1980s, “Oil companies have been finding less oil than we have been consuming,” and that “of the 65 largest oil producing countries in the world, up to 54 have passed their peak of production and are now in decline.” The report suggests the peak may have passed, but also suggests ways to combat the problem.
Source: Energy Bulletin
“Humanity’s way of life is on a collision course with geology—with the stark fact that the Earth holds a finite supply of oil. National Geographic considers the oil companies’ struggles to maintain a supply of inexpensive crude.
Source: National Geographic
Reference: The diesel problem
Diesel prices are rising faster than regular gas prices, hitting the trucking industry hard. Some truck drivers now spend $500 on half a tank. AAA reports that diesel prices have reached record highs, with an average of $3.83 a gallon this week. “Both diesel and gasoline prices had lagged behind the big increase in the price of oil, as slack wintertime demand helped to suppress increases at the pump. But now both fuels are rising rapidly,” according to The New York Times. “It’s killing us,” said Chad Beachler, co-owner of Beachler Trucking in Ohio. “Every day, I come in here and wonder if I have enough money to buy fuel.”
Source: The New York Times
Background: Past oil peaks and ways to save money
The price of crude oil hit a record of $98.02 in November last year, spurring observers to ask why hydrocarbon commodities are trading at increasingly high prices and when this upward trajectory will end. The falling U.S. dollar and the sub-prime mortgage crisis caused traders to move investments into oil, but rising oil prices forced dollar values to dip even lower.
Source: findingDulcinea
Oil prices fell in February following a three-day climb when Venezuelan President Hugo Chavez talked about cutting oil supplies to the United States. The threat came in response to Exxon Mobile’s court victory against Venezuela’s national oil company, Petroleos de Venezuela SA (PDVSA). The court ruled in favor of freezing $12 billion of PDVSA’s assets.
Source: findingDulcinea
FindingDulcinea provides a complete Web guide to automobiles, including advice on how to find the cheapest gas prices.
Source: findingDulcinea
© 2009 Dulcinea Media, Inc.
