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        Tuesday, August 30, 2005

       8/30/05 Get Ready for 4 Dollars a Gallon

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Get Ready for 4 Dollars a Gallon.

By H.L.
There is a fire at a refinery in Venezuela oil prices go up. A hurricane hits Louisiana,
and Mississippi, oil prices go up. The war will drag on for another 26 years, and oil prices go up. Bush takes a walk hand in hand with Prince Abdullah, through a field of daisies, and oil prices spike up again. Dick Cheney, decides that Halliburton did not make enough triple digit profits last month, and oil prices go up.
What is with oil prices going up every time the wind changes directions? As you well know, unless you have been living in a cave, oil prices are at an all time high, the price for a gallon of premium in Los Angeles in now hovering at about 3.15 a gallon. In 3 days the big Labor Day weekend begins, with experts predicting that just as many if not more people will be on the road despite the ridiculously high prices. AAA says that 30 Million travelers will take to the nations highways this weekend.
As I travel the Freeways, and streets of L.A. I see as usual that half the vehicles on the road are SUVs. At 3.15 a gallon and a 30 Gallon tank it is now costing close to 100 dollars to fill up and hit the gridlock traffic that is an everyday fact of life over here. How do these people do it? Many families here have to buy a house that is a good one-hour drive away from the city so they can afford it. That means 2 hour commutes every day, the gas prices must be driving them to near bankruptcy. Of course, soon they will not be able to declare bankruptcy anymore. If prices rise much more will we soon be seeing 2-year-old SUVs for sale for 1000 dollars? just enough to buy a 1991 Toyota Tercel.
Since people are maxing out their Visa cards to fill up the Escalade, and the Hummer, and continue to drive as much as ever, means that prices will continue to rise. Not until we get to 4 dollars a gallon will people finally start to try to conserve, and find ways to not use so much fuel.
Of course with oilmen running the country (Into the ground) you know that part of the reason for high prices are artificially created because oil companies know they can get away with it. Corporate Mergers have hit the oil business just like every other industry in

America, and when Exxon/Mobil, and BP/Amoco, decide to raise prices and sit on inventories there is nothing we can do about it. Kyle Cooper an analyst with Citigroup opines that prices are where they are because of Fear of what could happen, not what is actually happening today. Cooper says that oil should be trading right now at 35 to 40 dollars a gallon based on inventories, not at the 66 dollars a gallon that it is currently trading at.
"During the last 24 months, the world has added over 200 million barrels to petroleum inventories around the globe. How is that supply not keeping up with demand? Demand has grown significantly. Supply has met and exceeded demand by 200 million barrels." So What’s really happening is that oil companies are increasing inventories, yet raising prices because they know that Bush will let them get away with it. The question is how long will they be able to do this before the glut gets to be too much and the prices will have to come down. Probably just long enough to get to that magical 4 dollar a gallon level, at which point people will panic, and you will be able to pick up a Lincoln Navigator cheap.
Ever since the late 70’s, every time there was a big spike in oil prices, the pendulum eventually swung the other way bringing the prices back down lower then they were before the big hit. This is always due to artificial price increases. Between 1980, and 1982 gas prices were up to 1.20 a gallon. By 1986 it was all the way back down to 69 cents. In 1991 during the first president Bush’s term Gas prices went to 1.60 a gallon, and were back down to 1.15 a gallon in the mid 90’s. So prices will come down eventually but get ready to break the bank in the meantime if you own a Guzzler.


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