The Car and Truck Fleet and Leasing Management Magazine

Analysts Warn that $4 a Gallon Gas Possible This Year

March 03, 2008

NEW YORK --- The price of oil exceeded $103 a barrel for the first time last week, and some economists predict that gas prices could climb to $4 a gallon during the summer driving season, according to the Chicago Sun-Times.

But many analysts say that a $4 a gallon price by this summer is unlikely. A lot will depend on whether an unexpected event --- a war or natural disaster, for example --- will disrupt supplies in the near-term. Oil markets don't operate under the same supply-and-demand rules that other markets deal with. Pricing is complicated by supply interuptions in places like Nigeria and Venezuela and by investors attracted to petroleum by the weakness of the dollar against foreign currencies, Newsday reported.

"There are a lot of geopolitical and economic developments out there that have simply outweighed the bearish fundamentals," James Ritterbusch, president of oil trading advisory firm Ritterbusch & Associates in Galena, Ill., told Newsday.

Ritterbusch said that in purely mathematical terms, crude oil would need to rise to about $127 a barrel for the national average price of gasoline to rise to $4.

A survey commissioned by the Automotive Aftermarket Industry Association found that 65 percent of American car owners say they will dramatically change their driving behavior if gas hits $4.

"The real tipping point is $4 a gallon," said Kathleen Schmatz, AAIA president and CEO.

According to the survey, 91 percent of drivers are already driving less and 75 percent are maintaining their vehicles better because of rising gas prices. Other changes include car pooling, buying more fuel-efficient cars, and making greater use of public transit.

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