Wednesday, April 04, 2007

Expert A v. Expert B, gas price edition

Class, please come to order. Today's lesson is on the reliability of "experts".

Expert A:

Analysts say that the price reduction should hold during the coming days but won't translate into lower prices at the pump.

"Things are looking pretty bad for the upcoming summer driving season," said Flynn, citing a new government report showing that the U.S. stockpiles of gasoline fell by 5 million barrels in the past week, much more than analysts were expecting.

Flynn said he believes gasoline prices will head into record territory — currently a nationwide average of $3.07 — by the height of the summer season.

"This is the time of year when we're supposed to be building supplies, but it seems like the refiners just can't get ahead of what has been very, very strong demand," he said.

Today's report shows that the national supply of gas is at the low end of its average range for this time of year, meaning the United States will have less gas in the tank before the peak summer driving season in the coming months.

Analysts said that puts the country on the edge, making any disruption in supply — such as a hurricane in the Gulf of Mexico refining regions or an expansion of the crisis in the Middle East — that much more dangerous.

"Everyone asks me, will we see $4 a gallon? And the answer is, there is a strong possibility that we may see $4 a gallon," said Flynn.

Expert B:

One of the nation's leading gasoline price experts predicted Tuesday that the days of high gas prices may soon be behind us.

Gasoline prices run in 10- year to 13-year cycles and 2007 is a turning point, said Ben Brockwell, director of data, pricing and information services for the Oil Price Information Service of Rockville, Md. Brockwell was the keynote speaker at a convention of the Wisconsin Petroleum Marketers & Convenience Store Association at the Marriott Madison West in Middleton.

Normal spring gas price increases came early this year, Brockwell said and he believes they've peaked. In the long term, Brockwell predicted that the buildup of supplies will cause an eventual correction in the oil futures market that could send crude oil prices tumbling to as low as $15 a barrel.

Madison gas prices averaged $2.69 a gallon for regular Tuesday afternoon, up from $2.51 a month ago and up from $2.64 a year ago, according to The national average Tuesday was $2.72 a gallon. The price of crude oil dropped $1.30 Tuesday to $64.64 a barrel.

James Williams, an energy economist with WTRG Economics of London, Ark., agreed with Brockwell's analysis.

He said gas prices could drop about 25 cents a gallon over the next two months because current gasoline margins aren't justified by the price of crude oil. Spring price increases came early this year, he said, because some refiners finished their spring maintenance early. Refiners switch at this time of year from winter blend to summer blend, which costs more because of more expensive ingredients.

Okay, class. What have you learned?

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