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Tuesday, June 21st, 2011

Don’t Expect to See Gasoline Below $3 Any Time Soon

Author:     PATTI DOMM
Source:     CNBC
Publication Date:     : Monday, 20 Jun 2011 | 4:56 PM ET
 Link: Don’t Expect to See Gasoline Below $3 Any Time Soon
Stephan:   Regular SR readers know I have been saying for many months that this summer in a number of places we would see $5 a gallon gas -- it has already happened in some markets -- and that speculation and war would not allow the price to drop much, no matter what the crude price was. Here is the latest report. This is going to not only affect direct gasoline sales, it is also going to intersect with the growing food crisis, raising prices in that sector even further. I believe Middle class people who are conservatives in the upcoming election are going to vote once again against their own self-interest, and I expect that by this time next year the devastation of the broad middle of the country will be stark and painful. All the wealth in the country is moving to the top few per cent, or being squandered on wars, further benefiting the few. Meanwhile returning vets can't find jobs, or afford to drive their cars.

While oil has fallen sharply since May, gasoline is down just about 10 percent and it is not likely to drop below $3 any time soon.

Investors have watched West Texas Intermediate crude [CLCV1 93.68 0.42 (+0.45%) ] drop like a rock on the Nymex, down more than 20 percent from its peak of just above $115 to around $93 a barrel Monday. But Brent [LCOCV1 111.65 -0.04 (-0.04%) ], which is a better reflection of global oil prices, at about $111, is down just $15 from its high.

‘Unfortunately, the most expensive grade of crude determines the price of gasoline,’ said Tom Kloza, chief oil analyst at OPIS. ‘Brent is the most expensive. It represents crude on the water.’

Gasoline prices have dropped to $3.64 a gallon nationally from a peak of $3.98 in mid-May, according to AAA. Diesel prices at the pump have fallen more slowly but are beginning to catch up and are now averaging $3.97 a gallon.

‘We may get down to that $3 to $3.25 neighborhood for some states that have lower taxes and cheaper supply,’ said Kloza. But the coasts, specifically the Northeast, will […]

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