12:00 AM CST on Saturday, December 25, 2010
By ELIZABETH SOUDER / The Dallas Morning Newsesouder@dallasnews.com
Boone Pickens is predicting $100 oil again.
And you know what that means. Probably, another return to triple-digit oil prices, and hello, $3 gasoline.
The last time the Texas oil investor predicted oil would reach $100 a barrel, in 2008, he was right.
"In 2011, we'll see $100 oil," Pickens said in a press release this month.
"We simply cannot keep putting our country at risk by spending billions of dollars every month on foreign oil."
Other analysts share his forecast. And just as last time, analysts are debating whether oil prices are rising because people truly desire more oil, or because they just want to trade more of it.
But here's a bright spot: Hardly anyone thinks natural gas prices will rise much in 2011, so your utility bills will probably remain tame.
Some experts think oil prices will rise because the U.S. dollar is bound to decline in value as the Treasury issues more currency to pump up the economy. It will take more dollars to buy the same amount of oil; hence, higher prices.
"Right now, the biggest factor that's driving oil up is the Fed pumping money into the economy," said Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University.
"There's really not a whole lot keeping the price of crude oil from going above $100 a barrel right now," he said.
The U.S. dollar reached its highest point this year in June, at 84 cents against the euro. As the Treasury increased currency supply, the dollar dropped last month to 66 cents, and recovered a bit this month.
Some people are putting their money in oil as a safe haven from economic woes. Of course, those investors don't actually want a tanker to deliver the product to their front doors.
"Crude oil's become much more of a financial instrument than anything else. It's much more similar to gold and things of that sort than it is driven by fundamentals," said Alon USA chief executive Jeff Morris.
No gusher of demand
The sputtering economic recovery is boosting demand a bit, but most experts doubt fuel appetite will turn ravenous.
The Organization of Petroleum Exporting Countries earlier this month predicted smaller global demand growth next year. Despite the prospect of $100 oil, OPEC hasn't boosted production.
While oil markets ride the currency express train, natural gas markets are poking along on the local.
Natural gas prices have been relatively low because of a glut of production. Even optimistic investors have low expectations for next year.
"We ... believe that within a few years the current glut of gas will be cured by increased domestic demand and by exports of LNG," or liquefied natural gas, said turnaround financier Wilbur Ross, who recently bought a stake in the Dallas natural gas producer Exco Resources.
So expect utility bills to remain steady. Electricity prices in Texas follow natural gas markets because the state gets about half of its juice from natural gas-fired plants.
Gas prices rising
Gasoline is another issue. Already, people in 29 states are paying average gasoline prices of $3 or more per gallon. In Texas, the average is $2.866.
The rise is due largely to higher oil prices but also to stronger profit margins for refiners.
More important to refiners, however, is the price of diesel. Diesel sales track the economy, since goods must be shipped on trucks, trains and ships fueled by diesel. As the economy improves, diesel demand – and prices – have risen.
"The whole recovery is a diesel recovery," said Morris of the Dallas-based refiner Alon USA.
According to data from the state comptroller, demand for gasoline in Texas has risen about 1.3 percent this year. Demand for diesel is up 5.6 percent.
Morris said refiners are making a bit more money now that fuel demand is rising. And oil companies certainly do better when markets rise.
But there's another industry that makes more money when you pay more: credit cards.
"Credit card companies are making more off of gasoline than the retailer or the refiner," Morris said.
Every time a driver sticks a credit card in the pump, the card company collects about 3 percent of the amount spent.
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