[Ccarc] oil and gas prices

[Tom Murray]

Here comes $100 oil, and $3 gasWith crude setting new highs every day, experts say there's no way motorists won't see a spike at the pump.By Steve Hargreaves, CNNMoney.com staff writerOctober 26 2007: 5:16 PM EDTNEW
YORK (CNNMoney.com) -- With oil prices setting records over $90 a
barrel - and $100 looking ever more likely - experts say there's a good
chance drivers will see $3 gasoline before the end of the year."Three dollar gasoline in this market is unavoidable," said Stephen Schork, publisher of the industry newsletter the Schork Report. "At this rate, we're going to see $4 a gallon."    Experts say $90 oil will likely mean $3 gas soon.



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Crude
oil prices have soared nearly 30 percent over the last month, mainly
over fears that supply won't meet demand, a falling U.S. dollar, and
what some say is a high degree of speculative investment money. But
so far drivers have been lucky. The national average price for gasoline
has risen barely one cent, going from $2.81 last month to $2.82 this
month, according to the motorist organization AAA, although in many
areas of the country gasoline is already over $3.Analysts have said the relatively stable gasoline price is due to slack demand following the high-demand summer driving season. 
$90 oil won't kill the bull

But the relatively cheap
gas prices are causing profit margins to slip for refiners, who have to
pay top dollar for crude but aren't passing along the extra costs for
consumers, yet."That doesn't seem sustainable," said Kevin Norrish, a commodities analyst at Barclays in London.   Norrish said it's likely refiners will scale back gas production, just as the higher demand holidays approach."At some point, it has to happen," he said.Schork
also said a lack of refining capacity means U.S. refiners will struggle
to produce both gasoline and heating oil, so the country will end up
importing more gas during the holidays. And he noted that importing gas
with a weak U.S. dollar is an expensive proposition."We could easily see $3 by the end of the year," he said.Not all analysts agree.Nauman
Barakat, an energy trader at Macquarie Futures, the trading arm of
Macquarie investment bank, said gasoline prices near $3 a gallon have
kept demand down.The Energy Information Administration says
gasoline demand has been about flat for the last few months, whereas it
usually grows by about 1.5 percent a year."We're not going to
see a similar increase in gas prices," said Barakat. "But if [oil]
prices stay at these numbers, then of course it will be a different
story come spring." And therein lies the catch. All the analysts in this story expect crude to hit $100 a barrel."It's a matter of when, not if," said Norrish. Norrish
said it was fundamentals, not speculative investment money, driving oil
prices - strong demand, falling inventories, no production increases
from OPEC."The underlying market balance will continue to
tighten, and if the geopolitical situation worsens, we'll get to $100
very quickly," he said.Barakat said there are now more traders
betting oil will rise to $100 than there were betting it would cross
$90 back when crude was still in the $80s.And Schork noted the
sheer amount of oil contracts trading, and the fact that OPEC tried to
cool prices back in September with a production increase, did nothing
but send prices higher."There's a tremendous amount of bull energy in this market," he said. 'There's no reason we can't get to $100."  
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