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Tags: Schork | gas | prices | 4

Newsletter Editor Schork: Gas Prices May Hit $4 by Labor Day

By    |   Wednesday, 17 July 2013 06:13 PM

U.S. gasoline prices could hit $4 before Labor Day, as the recent surge in crude oil prices works its way down to the gas pump, says Stephen Schork, editor of The Schork Report, an energy newsletter.

"It all comes down to crude oil, and crude oil over the last month has risen $13 a barrel," Schork told Newsmax TV in an exclusive interview. "The general rule of thumb is retail gasoline increases 2.5 cents a gallon for every $1 rise in crude oil prices."

That means a 30- to 40-cent rise in gasoline prices prior to Labor Day, Schork says. The national average for regular unleaded gas stood at $3.66 a gallon Wednesday and "could be pushing up toward $4 by the end of this summer driving season," he said.

Watch our exclusive video. Article continues below.



The Nymex August crude contract settled at $106.48 a barrel Wednesday.

Three main factors are pushing crude prices higher now, Schork says.

First, there are supply-demand fundamentals. "Supply of crude oil in the United States over the last three weeks has dropped by a record 27 million barrels," he said. Meanwhile, demand is rising.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

Second, "Wall Street investors are pulling their cash out of the natural gas market and putting it into the crude oil market," Schork said. "So as prices have risen, we've seen more money come into the market," sending prices even higher.

Finally, there's the political turmoil in Egypt, he says. That country doesn't produce any crude, but a significant amount is transported through it to the West.

Looking at a longer period, the government's pursuit of a weak-dollar policy over the past 12 years has buoyed crude prices, Schork says. "I'm a believer that action by the Federal Reserve, as it pertains to the direction of the dollar, is steeply correlated to the price of oil prices," he said.

"There is an inverse relationship. Given that oil prices are priced in those cheap dollars, there is an inherent pop in demand in other currencies. So it certainly does attract investors."

Fed policy is important enough that "I'll bet you the Federal Reserve has more of an impact on oil prices than OPEC does," Schork said.

The good news for consumers is that once gasoline hits $4 or so, it should come back down, Schork says. "Keep in mind … [that] by the end of the summer, refinery demand is starting to ebb on a seasonality basis," he said.

"After Labor Day, there's going to be less discretionary driving, demand will pull back. So this is going to be a short-term rise in price -- not fun for the consumer over the next six, seven weeks. But there is a light at the end of the tunnel."

Rising gas prices could put a damper on consumer spending, Schork says. Gas expenditures now account for 4 percent of household income. "If we start to push up that percentage to 4.5 or maybe 5 percent, well, that's an entire percentage point being taken out of spending elsewhere in the economy, . . . probably discretionary consumer goods."

Editor’s Note: Put the World’s Top Financial Minds to Work for You

© 2022 Newsmax Finance. All rights reserved.


StreetTalk
U.S. gasoline prices could hit $4 before Labor Day, as the recent surge in crude oil prices works its way down to the gas pump, says Stephen Schork, editor of The Schork Report, an energy newsletter.
Schork,gas,prices,4
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2013-13-17
Wednesday, 17 July 2013 06:13 PM
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