Oil's surge in 2010 paves the way for $4 gasoline

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Like in the Administration, look for this to prolong the economic

recessionary tendancy.

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Oil's surge in 2010 paves the way for $4 gasoline

Price of oil rises 30 percent in 2010; gasoline prices could hit $4 a gallon in

2011

Kahn, AP Energy Writer, On Friday December 31, 2010, 10:03 pm EST

NEW YORK (AP) -- The price of oil is poised for another run at $100 a barrel

after a global economic rebound sent it surging 34 percent since May. That could

push gasoline prices to $4 a gallon by summer in some parts of the country,

experts say.

Flying, shipping a package and ordering a pizza all likely would get more

expensive in the new year if that happens and companies pass along higher energy

costs. Some economists say rising energy prices will slow economic growth.

The U.S. is the world's largest oil consumer, but prices since spring have been

on a roll primarily because of rising demand in developing countries, especially

China. China's oil consumption is expected to rise 5 percent next year; that

compares with less than 1 percent growth forecast for the U.S.

Benchmark oil for February delivery rose $1.54 on Friday to end the year at

$91.38 per barrel on the New York Mercantile Exchange. It reached $92.06 earlier

in the day, the highest since Oct. 6, 2008. Nationwide gasoline pump prices now

average $3.072 per gallon.

Gasoline expert Fred Rozell predicts that 15 states -- including Alaska, Hawaii,

Connecticut and Rhode Island -- will see gasoline prices top $4 a gallon by

Memorial Day. " A dollar more per gallon isn't that much -- probably about $750

more per year for each motorist, but there's a psychological aspect to gas

prices, " he said. " People are going to be up in arms about this. "

Higher oil prices have fattened oil company profits. Excluding BP PLC, the four

other major investor-owned oil companies posted combined profits of $59.7

billion in the first nine months of the year, a 49 percent increase from the

year before. Exxon Mobil Corp., Royal Dutch Shell, Chevron Corp. and Total SA

are expected to earn $81 billion for the full year.

The fifth oil giant, BP, was held responsible for the largest offshore oil spill

in U.S. history and booked $39.9 billion in charges related to the disaster.

Excluding special expenses like the Gulf of Mexico spill, analysts say the

company will still earn $20.2 billion in 2010.

" There's nothing this industry can't survive, " Oppenheimer & Co. analyst Fadel

Gheit said.

The price of energy and other commodities shifted into high gear in late August

when Federal Reserve Chairman Ben Bernanke signaled that the central bank was

prepared to

stimulate the economy by buying government bonds. The $600 billion program

didn't start until November, but speculators had already starting bidding up the

value of asset classes like oil.

A further oil price spurt came in late November as it became clear that Congress

was likely to extend for two more years tax cuts set to expire at the end of the

year.

The Organization of Petroleum Exporting Countries is capable of raising output,

if it needs to, by more than five million barrels per day. Still, Stanley

estimates that the rising energy needs of China and other emerging economies

will consume about half of that amount over the next two years. That could

create supply pressures similar to those that preceded the price spike of 2008,

when oil soared to $147 a barrel.

Hofmeister, former president of Shell Oil and author of " Why We Hate The

Oil Companies, " predicts Americans will pay $5 per gallon for gasoline by 2012.

Other experts say that's a long shot.

" That means oil close to $200 " per barrel, analyst and trader Schork

said. " We can see it, but we could also see a global depression, too. "

In other Nymex trading Friday, natural gas for February delivery rose 6.7 cents

to settle at $4.405 per 1,000 cubic feet. Unlike oil, natural gas prices are

less than half where they were in 2008. That's due largely to the technological

advances that allowed energy companies to unlock huge deposits in underground

shale formations in the U.S.

Heating oil for January delivery rose 5.83 cents to settle at $2.5437 per gallon

and gasoline for January delivery added 6.14 cents to settle at $2.4532 per

gallon. In London, Brent crude increased $1.66 to settle at $94.75 per gallon.