Gasoline Won’t Hit $4 a Gallon, Expert Says

By Susan Salisbury, The Palm Beach Post, Fla.

Mar. 7–Don’t look for any relief at the gasoline pump until the second half of this year, a leading oil expert said Thursday.

But also don’t look for gasoline to peak any higher than $3.50 to $3.75 a gallon, said Tom Kloza, chief oil analyst at the Wall, N.J.-based Oil Price Information Service.

“This year will be a less volatile year than some of the previous years,” Kloza said in a speech to the Economic Forum of Palm Beach County at the Kravis Center. “I think people start driving a little less above $3.25 and certainly above $3.50. We will reach a spring peak like we do most years, then we will spend the second half of the year drifting down a bit.”

Kloza, 54, who was among the founders of OPIS 27 years ago, is known to many from his frequent appearances on national television. Other analysts have suggested gas prices could reach $4 a gallon, but Kloza said he does not think it will get that high.

Gasoline prices in Palm Beach County and the rest of the nation will be tempered by an increase in the availability of ethanol blends at the pump. Marathon and Hess are among gas stations selling blends of at least 10 percent ethanol, he said, which should displace 5 percent to 6 percent of the gasoline and make prices more affordable.

“Within the next few months, you will see a lot more ethanol,” Kloza said. “That will cheapen gasoline by a few cents or so.” Record oil prices are being driven by speculative trading by investment houses and hedge funds, he said.

On Thursday, light, sweet crude for April delivery rose 95 cents to settle at a record $105.47 a barrel on the New York Mercantile Exchange after earlier spiking at a new trading record of $105.97.

“There have been tremendous changes in the oil business in the last few years,” Kloza said.

Until about seven years ago, the amount of oil traded was based on production, with trading matching production, at about 85 million barrels a day. These days, oil is an “abstract concept,” he said.

“In the U.S. we produce 200,000 barrels a day of West Texas sweet crude. Yesterday, we traded 800 million barrels of West Texas sweet crude,” Kloza said. “It really no longer comes down to supply and fundamentals.”

At the pump, meanwhile, gas prices extended their own advance toward record levels. The national average price of a gallon of gas rose 0.7 cent overnight to $3.185, according to AAA and OPIS.

Florida’s average was $3.27, while in West Palm Beach-Boca Raton it was $3.34.

Some who heard Kloza’s presentation said gasoline prices are affecting Americans’ discretionary spending, with fewer people dining out, for example.

“It does affect my driving. I organize my errands,” said writer Sarah Brown Weitzman of Delray Beach.

She blamed President Bush, a former oil executive, for the high prices.

“We have an oil family running the country,” Weitzman said.

George Elmore, chief executive of Delray Beach-based road contractor Hardrives Inc., said the solution to the crisis is more production.

“I think we ought to allow more oil drilling,” he said.

Former U.S. Rep. Harry Johnston, D-West Palm Beach, said alternative fuels, such as cellulosic ethanol, have to be part of the answer.

People also could drive less, Kloza said.

If everyone in the country drove just 500 fewer feet a day, gasoline demand would decrease by 1 percent, and prices would fall somewhat, he said.

“It would tilt the balance enough,” Kloza said.

The Associated Press contributed to this story.

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