When will gas-price rise run out of fuel?

Bob Moon Jun 9, 2009
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When will gas-price rise run out of fuel?

Bob Moon Jun 9, 2009
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Kai Ryssdal: For those who’ve been hoping there’s an economic recovery in the wind, one word today: gas and oil. All right, three words, but you get my meaning. The rise in pump and crude prices is raising some fears about that recovery. Our senior business correspondent Bob Moon reports.


BOB MOON: It’s true that crude prices jumped 3 percent today after the Energy Department bumped up its forecast for world oil demand. It’s the first time it’s done that since last September.

But try to hang on, America, because some experts are hopeful that pump prices might be close to topping out — just as soon as commodities investors get a little gas bubble out of their system.

Oil trader and industry analyst Stephen Schork is among a growing number of market watchers who argue that demand is still too weak to justify this new round of price speculation.

STEPHEN SCHORK: A lot of the fundamental guys are saying oil belongs in the $40 range. Then you get all the technical guys, guys that look at a bunch of lines on a couple charts and say, “Oh! You know, that’s a moving average and so forth, and that means that’s bullish,” regardless of the economic reality. And they continue to pile money into the market. The market is effectively being hijacked by a bunch of technicians.

Schork is worried the speculators risk weakening the economy even more. And at Moody’s Economy.com, energy specialist Chris Lafakis agrees there’s cause for concern if higher pump prices stifle consumer spending.

CHRIS LAFAKIS: If you look at not only the amount of jobs that have been lost, but the slowing in wage growth in recent months, consumers are in a much more tenuous position this summer than they were last year.

On the other hand, Lafakis thinks that’s exactly why gasoline and oil prices won’t go much higher because, quite simply, they can’t.

LAFAKIS: We believe the level of demand is sufficiently weak right now to take the edge off pump prices.

Indeed, AAA says gasoline prices failed to rise overnight for the first time in 42 days, and the Energy Department is now forecasting that gas will peak at $2.70 a gallon sometime next month.

I’m Bob Moon for Marketplace.

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