If dollar continues to weaken(which it will) $6.00 gas is coming!!

Discussion in 'Economics' started by S2007S, Apr 20, 2011.

  1. S2007S


    Interesting points in this article about where the price of gas is heading, without Bubble ben bernanke looking to raise rates anytime soon and more QE waiting to be pushed into the system the only way for the dollar to move is down! If the dollar breaks lows which it most likely will it will only send oil and commodities higher and higher. As for $6.00 gas I dont know but I think $5.00 is certain by mid 2011 if Bubble ben bernanke keeps his easy money policies in place.

    $6 Gas? Could Happen if Dollar Keeps Getting Weaker
    Published: Wednesday, 20 Apr 2011 | 1:46 PM ET
    Text Siz
    By: Jeff Cox
    CNBC.com Staff Writer

    A dollar plumbing three-year lows is hitting Americans squarely in the gas tank, and one economist thinks it could drive prices as high as $6 a gallon or more by summertime under the right conditions.

    With the greenback coming under increased pressure from Federal Reserve policies and investor appetite for more risk, there seems little direction but up for commodity prices, in particular energy and metals.

    Weakness in the US currency feeds upward pressure on commodities, which are priced in dollars and thus come at a discount on the foreign markets.

    One result has been a surge higher in gasoline prices to nearly $4 a gallon before the summer driving season even starts, a trend that economists say will be aggravated as demand increases and the summer storm season threatens to disrupt oil supplies.

    "All we have to have is a couple badly placed hurricanes which could constrain some of the refinery output capacity in some key locations," says Richard Hastings, strategist at Global Hunter Securities in Charlotte, N.C. "If you get weakness in the dollar concurrent with the strong driving season concurrent with the impact of one or two hurricanes in the wrong place, prices could go up in a quasi-exponential manner."

    Using a model that combines "subtle rates of change" with movements in the dollar index [.DXY 74.46 -0.57 (-0.77%) ] and commodity prices, Hastings figures the low dollar is responsible for about one-third, or $1.31, of the total gas-at-the-pump cost. Regular unleaded Wednesday was $3.84 a gallon nationwide, according to AAA.

    While there's far from unanimity about the dollar's future course, the proportionate contribution that currency weakness makes to oil prices is clear.

    The dollar as measured against a basket of foreign currencies has dropped 6 percent this year, while regular unleaded gasoline is up about 28 percent.

    Gas prices also have been boosted from turmoil in the Middle East which in turn has triggered a wave of speculation that traders estimate has added about $15 or so to the cost of a barrel of crude [CLCV1 111.31 3.03 (+2.8%) ], which is now teetering above the $110 mark.

    Hastings sees gasoline having "no problem" getting to $6.50 a gallon over the summer after increased demand and storm disruptions come into play.

    Others, though, say gasoline prices haven't needed any help so far from other events—the moves by the Fed to keep interest rates in negative real terms are enough to boost energy by themselves.

    Michael Pento, senior economist at Euro Pacific Capital in New York, says there is an almost perfect negative correlation between the falling dollar and oil prices—minus-0.9 to be exact.

    "When you have negative correlations that strong, it's not hard to understand that the reason why we're having this price spike in commodities is primarily because of the weaker currency and not because of shortages of oil or international tensions or global growth," Pento says.

    The assertion from Hastings that the weak dollar is responsible for one-third of the total cost for a gallon of gas "sounds very low," Pento says, adding that a barrel of oil should be closer to the $65 to $70 range if priced properly.

    "That's exactly where it would be if we weren't crumbling our currency," he says.

    Should events follow their current course, sharply higher gas prices will burden consumers further as they also cope with the rise in food costs this year.

    Hastings projects the dollar index to test 72 at some point—another 3 percent drop—while Peter Cardillo, chief economist at Avalon Partners in New York, sees the dollar dropping to the 73.50 level.

    "The global economy is quite strong, and the weak dollar is basically fueling even higher energy prices. That's not transitory," Cardillo says. "Gas prices in the Northeast are over $4 a gallon. How could anyone say that's not a burden?"
  2. So??

    why is this a big deal?

    There are some countries where people making $1/hr and pay $11/gal for gas and nobody complains.

    Buy a small car or move next to your job. Problem solved

    Get over it.

  3. But I REALLY love my Hummer!!!
  4. Ill still drive my S6 and just bought a new Toyota 4 runner, full beach addition with the heavy rims and tow package.

    6 dollar gas will only effect those who can't afford it.

    I have to agree with Misterno, my clients overseas in most countries have been paying 6 plus a gallon, if you convert liters to gallons.

    Time to wake up America and stop living beyond your means and sucking off the TITS of the GOV to compensate.

    Game over for the FREELOADERS.

    The middle class has about 5 years left before they have to make a hard choice between sucking on the TIT of the GOV or working hard and expanding their Income.


    This would free up more capital for people to afford 6 bucks a gallon.


    Until then, I will smile every time i Fill up my tank.

    Besides, this is what the PARASITES WANT. It is out of our control unless we revolt, which I doubt will happen. The PROGRESSIVES want CLASS WARFARE as do most of those in DC.

    The WAR has started.
  5. Roark


    $6 gas means a new POTUS in 2012.
  6. I thought it was an S8. Which one is it? Arent you getting tired of spinning BS or are your "clients" impressed by ET self-praise?

  7. when gas hits 10$ is the 0 for Obama?

  8. Hahahahaha life is great in Fantasyland. No wonder this guy's posts are so angry yet he claims to be so successful.
  9. Kpatel83


    I think we will see in the range of 5.35 - 6.25 in 3 months.
  10. Traded the S8 In as it was an older Model there Idiot.

    Go watch SHARK TANK or something and learn how to make money.
    #10     Apr 20, 2011