$10 A Gallon Gasoline?

April 30, 2008

The way the price of oil and gasoline are spiking upwards, you’d think people would be rioting in the streets. A few dozen truckers demonstrated in D.C. yesterday and there’s been calls for nationwide strikes; however, so far so good. But me thinks the top is about to pop, and when it does, you won’t be able to get the toothpaste back in the container. No way!

Meanwhile, still living in a fantasy world in Saudi Arabia (trillions of dollars can cause people to lose sight of reality you know) and OPEC leaders warned oil prices could hit $200 a barrel and there would be little the cartel could do to help. Well, maybe! The comments made by Chakib Khelil, Algeria’s energy minister, came as oil prices hit a historic peak of $120 a barrel, putting further pressure on global economies.

If people are willing to pay $120 a barrel why not sell it for $120?

Dave Gares, an independent truck driver since 1974 who hauls mostly soft drinks these days, never dreamed hed be paying more than $4 per gallon for diesel. It takes 220 gallons to fill up his tractor-trailer rig, which gets a little over six miles per gallon on the road. It costs Gares up to $1,400 to fill up, with the added cost of fuel additives to boost his trucks mileage. He said he has to absorb the increases to stay competitive.

$1,400 fill up! And our US$ is worth less and less.

So, get ready for another economic shock of major proportions — a virtual doubling of prices at the gas pump to as much as $10 a gallon. We the people are the only ones who can stop the rise, but until the pain gets really serious, we’ll keep pretending all is well in the neighborhood. It ain’t!

Gasoline nationally is in an accelerated upswing, having jumped to $3.58 a gallon from $3.50 in just the past week. In some parts of the country, including New York City and the West Coast, gas is already sporting a price tag above $4 a gallon. There was a pray-in at a Chevron station in San Francisco on Friday led by a minister asking God for cheaper gas, and an Arco gas station in San Mateo, Calif., has already raised its price to a sky-high $4.62.

I don’t think God’s going to get involved in this deal. But hey, pray on!

The chairman of Houston-based Dune Energy, Alan Gaines, sees gas rising to $7-$8 a gallon and one needs to listen to him! Early last year, with a barrel of oil trading in the low $50s and gasoline nationally selling in a range of $2.30 to $2.50 a gallon, Mr. Gaines — in an impressive display of crystal ball gazing — accurately predicted oil was $100-bound and that gasoline would follow suit by reaching $4 a gallon.

Don’tcha hate it when people re right!

His latest prediction of $200 oil is open to question, since it would undoubtedly create considerable global economic distress. Dih! Further, just about every energy expert I talk to cautions me to expect a sizable pullback in oil prices, maybe to between $50 and $70 a barrel, especially if there’s a global economic slowdown.

If there’s a global meltdown and I’d give some good odds on that one!

Written by Ernie · Filed Under Daily Commentary