Intelligence sources close to the crisis in the middle east are reporting that the shutdown of oil production in some of the middle east countries who are experiencing uprising and revolution, will cause a further decrease in oil production. This decrease in production in countries such as Libya who supply only 2% of the world’s oil supply, cause fear in the global oil markets.
All that is required for gas prices to spike sharply is a belief that there will be a shortage in crude oil. Oil is a global currency that is traded world-wide and those who hedge against these prices are reporting that we may see $4.00 gas prices in the U.S. by June.
If the crisis continues throughout the summer of 2011, gas prices could hit $5.00 per gallon. This plateau is considered to be the tipping point by many experts that will bring the American economy to a halt.
Oil is up $15.00 a barrel since January 15th when the conflict in Egypt began. This increase in the price of crude oil has caused gas prices to soar 55 cents a gallon. With oil now at $100.00 per barrel, we will see another 35 cent increase in the next month to two months.
We are entering the Summer season when Americans get out in their cars and drive. This is not going to be the kind of news that will encourage people to begin to spend again and cause the economy to continue to grow.
By the way, do not get angry at the corner gas station owner. He is selling you his gas at just a few cents over his cost from suppliers. He make his money on the candy bars and soda’s that you buy when you go inside to pay for your gas. Higher gas prices at the pump are not the fault of the gas station owners.
This increase in gas price is caused by oil companies fearing a shortage in supply, raising prices to meet that future shortfall. Yes it is true, although there is no oil shortage as yet, you are paying a higher price for your gas on the bet that oil will be in shorter supply and be higher in price.
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