Peak Oil News: $5 a gallon!

Thursday, May 04, 2006

$5 a gallon!

New York Daily News

As oil soars toward $100 a barrel, it's likely, experts say

By Paul H. B. Shin

Tight petroleum supplies amid soaring demand could drive crude oil prices above $100 a barrel by this winter, energy experts warned yesterday.

That could translate into gas prices of more than $5 a gallon at the pump and spike home heating oil an additional 30%, analysts said.

Iran's deputy oil minister, Hadi Nejad Hosseinian, fueled the paranoia yesterday by predicting that crude could hit $100 a barrel by the end of the year - $26 above even yesterday's near-record price.

The problem is that Iran, the world's fourth-largest producer of crude, is just one of several hot spots in danger of boiling over, experts said.

"There's so much that could go wrong right now," said Phil Flynn, an energy analyst at Alaron Trading in Chicago. "This is the scariest time we've seen in oil in a long period of time."

In addition to the looming showdown with Iran over its nuclear ambitions, terrorists have repeatedly threatened to attack oil infrastructure in Saudi Arabia; Nigerian rebels have disrupted exports by 25%; Iraq is pumping out 30% less crude than it did before the war; production in the Gulf of Mexico has yet to return to normal after Hurricanes Katrina and Rita, and Bolivian President Evo Morales yesterday seized control of the country's oil and gas fields and gave foreign companies 180 days to agree to new deals with the government.

"We're on a hair trigger," said John Kilduff, senior vice president of energy risk management at Fimat USA, a New York commodities trading firm.

"Unfortunately for consumers, we're on the brink of [$100 a barrel] as we speak," he said. "It's been a parade of horribles."

U.S. Energy Secretary Samuel Bodman said the market is worried about a supply disruption, and "there's no doubt a [fear] premium" is reflected in today's prices.

Crude prices also are being pushed north by soaring demand from developing countries such as China and India, coupled with a razor-thin surplus capacity among exporters.

Bodman said high gasoline prices are a "crisis" for Americans. "It is a crisis in the sense of the individual," Bodman said after a meeting with the Saudi oil minister.

If crude hits $100 a barrel, gas prices could easily top $5 a gallon here and home heating oil could jump an additional 30%, Kilduff said.

"That would be quite painful," he added.


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