Expert says oil price will fall
Despite fuel prices hitting record levels, a national oil-price expert told Wisconsin gas station owners Tuesday that he expects crude oil prices to fall below $80 a barrel by next year.
“I believe this is a market in transition,” said Ben Brockwell, director of the Oil Price Information Service in Wall, N.J. “I believe it is a market that will be lower in price.”
Brockwell told members of the Wisconsin Petroleum Marketers and Convenience Store Association meeting at the Madison Marriott West in Middleton that oil prices now are propped up by commodity traders and the weak U.S. dollar, and eventually oil will fall, which also will bring down pump prices.
Diesel fuel prices in Madison hit a record average high of $4.096 a gallon on Tuesday, according to the AAA Daily Fuel Gauge Report. Statewide, the diesel price also set a record of $4.118 per gallon.
AAA reported a national record average high for gasoline of $3.386 a gallon.
The average Madison price of $3.389 per gallon of regular was approaching the local record high of $3.402 set on May 24, 2007.
Light, sweet crude for May delivery jumped as high as $114.08 a barrel shortly after regular trading ended on the New York Mercantile Exchange on Tuesday. That is nearly $2 above an intraday high set last week. Oil rose as high as $113.99 a barrel during the regular session before settling at $113.79, up $2.03 from Monday’s record close of $111.76 a barrel.
Dan Gilligan, president of the Petroleum Marketers Association of America, said the high prices nationwide are unprecedented.
“Independent petroleum marketers across the country are in uncharted water,” he said. “Never before in history have petroleum marketers had to live with the high prices we have over an extended period and there’s no end in sight.”
AAA is forecasting that average gasoline prices will peak nationally at $3.50 this spring and summer and won’t reach $4 a gallon, said Pam Moen of AAA Wisconsin.
But she said that forecast assumes no unforeseen events such as natural disasters or a crisis in an oil-producing nation.
“It defies logic that this can go on forever,” she said. “People are finding ways to save money and use less fuel and demand has gone down.”
Brockwell said his prediction that crude oil will fall to less than $80 a barrel is based on five-year averages.
When crude oil was $80 a barrel last September, Madison area gas prices averaged $2.92 a gallon.
Brockwell said he expects worldwide conservation efforts and alternative fuels to reduce demand for oil while exploration has found new oil fields in Brazil and China.
Oil now is a hot market for investors like technology stocks and real estate were hot markets earlier in the decade before they faded. Brockwell said the amount of oil traded is 30 times the amount that actually could be delivered.
“Right now, if I’m an investor, there’s not a lot of places I can put my money,” he said. “Oil futures trading eventually will shift to something else.”
Brockwell also said Chinese demand, which has contributed to escalating diesel prices, may slacken after this summer’s Olympics.
The continuing rise in diesel fuel prices and low margins for dealers could mean that only truck stops will offer diesel in the future, he said.
Source: Wisconsin State Journal
Tags: experts, fuel costs, oil price