That’s what one former oil exec is saying and based on the increased demand we’re seeing in China…this doesn’t seem unlikely.
NEW YORK (CNNMoney.com) — The former president of Shell Oil, John Hofmeister, says Americans could be paying $5 for a gallon of gasoline by 2012.
In an interview with Platt’s Energy Week television, Hofmeister predicted gasoline prices will spike as the global demand for oil increases.
“I’m predicting actually the worst outcome over the next two years which takes us to 2012 with higher gasoline prices,” he said.
Some analysts don’t agree with that timeframe…but the price?
Tom Kloza, chief oil analyst with Oil Price Information Service says Americans will see gasoline prices hit the $5 a gallon mark in the next decade, but not by 2012.
“That wolf is out there and it’s going to be at the door…I agree with him that we’ll see those numbers at some point this decade but not yet.” Kloza said.
So why did gas get so high in 2008? Speculators were artificially driving up demand. That’s why you saw prices plummet so rapidly. Yes, there was an economic downturn, but that should have pushed prices down before the spike. You simply can’t account for a $2.50 price drop in gas prices like that.
In June 2006, oil traded in futures markets at some $60 a barrel and the Senate investigation estimated that some $25 of that was due to pure financial speculation. One analyst estimated in August 2005 that US oil inventory levels suggested WTI crude prices should be around $25 a barrel, and not $60.
That would mean today that at least $50 to $60 or more of today’s $115 a barrel price is due to pure hedge fund and financial institution speculation. However, given the unchanged equilibrium in global oil supply and demand over recent months amid the explosive rise in oil futures prices traded on Nymex and ICE exchanges in New York and London it is more likely that as much as 60% of the today oil price is pure speculation. No one knows officially except the tiny handful of energy trading banks in New York and London and they certainly aren’t talking.
I can verify that 60%, but there’s obviously a huge amount of speculation going on the market. We’ve been taught that this is a good thing, but isn’t this what fuels this Boom/Bust economic spincycle we seem to constantly find ourselves in? Find the hot new thing to invest in, exploit the market to its fullest extent, let greed drive prices up, up, up and then CRASH!…time for another recession! Why can’t we have worthwhile regulations in these markets so people can create wealth, but stable, long term wealth?