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May 21, 2008

Is $12-15-a-Gallon Gas 'Inevitable' ?

Topics: Oil

According to Robert Hirsch, Management Information Services Senior Energy Advisor, in "the mother of all doom and gloom gas price predictions," $12 for a gallon of gas is "inevitable" and it could rise to $15 per gallon. And that may not be the worst of it; Hirsch predicts we could see rationing:

"[T]he prices that we're paying at the pump today are, I think, going to be 'the good old days,' because others who watch this very closely forecast that we're going to be hitting $12 and $15 per gallon," Hirsch said. "And then, after that, when oil - world oil production goes into decline, we're going to talk about rationing. In other words, not only are we going to be paying high prices and have considerable economic problems, but in addition to that, we're not going to be able to get the fuel when we want it."

More here (with video) ...

However, the doom and gloom scenario could be just media hype playing the game of "if it bleeds it leads and if it doesn't bleed pretend it does," at least according to analyst John Kilduff:

Kilduff, who is also a CNBC contributor and the vice president of risk management for MF Global (NYSE:MF), isn't predicting oil prices at those levels.

"I'm not going to $200; I'm not even go to $150, but I think somewhere in the $130s should be the top of this whole run," Kilduff said on CNBC's May 6 "Kudlow & Company," contradicting what Costello reported.

A Lehman Brothers (NYSE:LEH) forecast that received very little media attention predicted oil would drop to $70 a barrel, according to "Kudlow & Company" host Larry Kudlow..

"The Call" host Melissa Francis gave Kilduff an opportunity to clarify his position. She asked Kilduff what was more likely - $200-barrel oil in two years or $75-barrel oil in four years. He said he thought oil at $200 a barrel within two years was "less likely" than oil falling to $75 a barrel within four years. He explained why oil would peak at his target price of $138, then fall.

"If equities can really come back into favor, a lot of this speculative money will come out of the market," Kilduff said on the May 7 "The Call." "And I think one of the key things as well is what happens to China after the Olympics - do they really ratchet down on the growth they've gone through and do they raise prices at the pump? You know China's demand is up 5 percent quarter-on-quarter, year-on-year because they subsidize so much of the price. If they raise their price - that would be a demand killer."

So, what are gas prices actually going to? Who knows at this point with prices increasing almost daily. We can only hope the gloom and doom scenario is media hype, and that Kilduff's predictions are more on target than Hirsch's. One thing is certain though: should the Democrats and RINOs in Congress push through cap-and-trade legislation which could face a vote in early June, we'll see gas prices move rapidly toward Hirsch's predictions.

Posted by Abdul at May 21, 2008 9:38 PM

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Comments

Posted by: harry at May 22, 2008 12:20 AM

Posted by: harry at May 22, 2008 10:48 AM

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