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Pump price to jump 20 cents next 2-3 weeks: government

U.S. consumers could pay record gasoline prices for the upcoming Thanksgiving holiday with pump costs expected to climb another 20 cents over the next two to three weeks, the government's top energy forecaster warned on Monday.

Guy Caruso, who heads the U.S. Energy Information Administration, said not all of the recent jump in crude oil prices has been reflected in motor fuel costs which now top $3 a gallon in many parts of the country, about 80 cents more than a year ago.

"We haven't seen the full pass-through (of high oil prices) yet," Caruso told reporters at a briefing on oil market conditions held at Energy Department headquarters. "I would say what's in the pipe right now (for gasoline) is about another 20 cents."

If the projected gasoline price materializes it would be the most consumers have ever paid to fill up at Thanksgiving and could break the all-time high of $3.22 a gallon set last May.

The national average retail pump price has already jumped by 25 cents since mid-October, reflecting soaring crude oil costs, which for U.S. oil hit a record $98.62 a barrel last week.

The price of crude accounts for about half the cost of making gasoline.

So far, healthy gasoline imports from Europe and weaker driving demand for this time of the year has helped soften some of the price spike, Caruso said.

Caruso said high prices are the result of strong global oil demand and tight supplies. "There's very little cushion in the market ... consumption outpacing production," he said. "We've seen steadily declining (oil) inventories."

OPEC ministers are scheduled to meet in early December to review their oil policy. Karen Harbert, the assistant energy secretary for policy and international affairs, said the Bush administration has not received any messages from OPEC officials on whether the group will increase output.

"We hope they will take action when it's necessary to ensure there is a much more calm and mutually beneficial (oil) marketplace," she told reporters at the same briefing.

Caruso warned that if the group does not boost oil production levels, crude oil prices will stay "well above" $80 a barrel and push gasoline costs higher during next spring's busy driving season.

Exxon CEO blames tight supply and dollar for high oil

Exxon Mobil Corp on Monday blamed supply tightness together with strong demand and a weak dollar for high oil prices and said the oil market was likely to stay much the same in 2008.

Exxon Mobil Chief Executive Rex Tillerson said that while he expected supply to catch up with demand in two to three years, the longer term outlook for oil depended on resource-rich nations opening up their countries for investments.

"It is not a resource problem. The world has plenty of oil," Tillerson told reporters at the World Energy Congress in Rome.

"It is an issue of whether or not the investment dollars, technology and the know-how to develop those resources in an efficient way and a reliable way ...is going to be brought to bear on those resources."

Oil hit a record high of $98.62 a barrel last week. While it has eased since, it remains within reach of $100.

In his speech to the congress Tillerson launched a scathing attack on the rising trend of "resource nationalism", calling it a major barrier to innovation and development of new energy resources.

Emboldened by rising prices, countries such as Russia, Venezuela and Ecuador are seeking more cash and control from western companies that drill in their oil and gas fields. Many of them have either booted out western oil companies or sought to renegotiate earlier contracts.

Venezuela earlier this year pushed out Exxon Mobil and ConocoPhillips as part of a nationalization drive after they failed to strike a deal to stay in multibillion-dollar projects.

"Unfortunately, current conditions and emerging challenges have led some to pursue isolationist or protectionist energy policies which could have severe consequences for the global economy and for global energy security over the longer term," Tillerson said.

He added that people in resource-rich countries would ultimately bear the "long-term costs of such counterproductive policies".

The Exxon Mobil CEO also said talks to settle a dispute between Western oil groups and the Kazakh government in the giant Kashagan oil field, the world's biggest oil discovery in three decades, were "very active".

Kazakhstan has criticized Exxon and its partners -- Italy's ENI (ENI.MI: Quote, Profile, Research), Anglo-Dutch Royal Dutch Shell (RDSa.L: Quote, Profile, Research) and France's Total (TOTF.PA: Quote, Profile, Research) -- for delays and cost overruns and demanded billions of dollars in compensation.

It has also called for a bigger role for state oil company KazMunaiGas (RDGZ.KZ: Quote, Profile, Research) and has set November 30 as the final deadline in its talks with the western firms.

When asked if the partners were likely to give KazMunaiGas an increased stake in the field, or whether the government would be satisfied with simply a cash settlement, Tillerson said: "Those talks are very active in all of the areas you touched on." He refused to give further details.

Is this guy talking just to hear himself?

Most likely.

Oil off more than $3 on demand forecast By JOHN WILEN, AP Business Writer
Tue Nov 13, 5:35 PM ET
 


NEW YORK - Oil prices that last week seemed on an inexorable path toward $100 a barrel slid more than $3 to the $91 level Tuesday after the International Energy Agency cut its demand forecasts and said crude supplies are rising.

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Prices also fell after diplomats said Iran has handed over blueprints key to its nuclear program, meeting a central United Nations demand and potentially defusing the country's standoff with the West.

"One of the reasons that we've been strong on oil all year is concerns about Iran's nuclear program," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

Light, sweet crude for December delivery fell $3.45 to settle at $91.17 a barrel on the New York Mercantile Exchange. Only last Thursday, crude prices traded as high as $98.62, a record, and appeared headed for $100.

Retail gasoline prices, meanwhile, rose further above $3 a gallon Tuesday amid predictions prices will rise even more to catch up with oil's recent advance to near $100 a barrel. The national average price of a gallon of gas rose 0.4 cent overnight to $3.105, according to AAA and the Oil Price Information Service. Oil futures have jumped 42 percent since late August.

On Monday, Energy Information Administration chief Guy Caruso predicted gas prices will rise another 20 cents a gallon by December to catch up with oil, according to Dow Jones Newswires. Gas prices peaked at $3.227 in late May. Diesel prices set a new record of $3.446 a gallon Tuesday, according to AAA and OPIS.

But those high prices appear to be cutting demand, the IEA said Tuesday in a report that clearly sent oil prices downward.

The IEA, an energy policy adviser to 26 predominantly Western industrialized nations, lowered its fourth-quarter oil demand forecasts by 500,000 barrels a day, and cut its demand forecasts for 2008 by 300,000 barrels a day. Year-over-year demand growth will now average 1.2 percent in 2007 and 2.3 percent in 2008, the IEA said.

At the same time, global oil supplies grew by 1.4 million barrels a day in October due to increases in OPEC supplies and production in China, Azerbaijan and Russia, the IEA said. The Organization of Petroleum Exporting Countries boosted output by 410,000 barrels a day in October, the IEA said.

"There are ... strong indications that high prices are depressing demand," the IEA said in its monthly Oil Market Report.

Oil's recent surge — crude prices have jumped 42 percent since late August — was fed by a mixture of concerns about falling domestic supplies and rising demand, the threat of disruptions to the oil flow from the Middle East and actual breaks in production from Nigeria.

But analysts have long theorized that oil was also lifted by speculative buying incited by the dollar's long decline. And while some of the market's fundamental concerns seemed to be ebbing Tuesday, some of the selling was likely due in part to a reversal of those speculative bets.

Still, whether Tuesday's sharp decline marks the beginning of the end of an oil bubble remains to be seen. Prices did rebound late in the session from lows near $90. Analysts say investors who still believe oil will rise above $100 will swoop in to "buy the dips" whenever oil prices fall.

Investors will be further tested on Thursday when the Energy Department issues its weekly inventory report. A larger than expected decline in crude supplies could reverse the recent bearish sentiment and send prices back towards $100, analysts say.

Reports from the IEA are closely watched by energy traders and investors. Previous IEA predictions of strong fourth quarter demand and falling supplies have helped fuel crude prices.

"As demand deteriorates, even slightly, that really takes the bullish (sentiment) out of the market," said James Cordier, president of Liberty Trading Group in Tampa, Fla.

Other Nymex petroleum futures also fell Tuesday. December gasoline futures dropped 9.98 cents to settle at $2.3167 a gallon, while December heating oil futures fell 8 cents to settle at $2.5021 a gallon.

December natural gas futures fell 1.2 cents to settle at $7.949 per 1,000 cubic feet.

In London, December Brent crude fell $3.15 to settle at $88.83 a barrel on the ICE Futures exchange.

Oil prices were also pressured Tuesday by indications OPEC may agree at a meeting next month to further boost output, and by Tuesday's expiration of December crude call options.

On Tuesday, Saudi Arabia's Oil Minister, Ali Naimi, reiterated that OPEC may discuss increasing output at a meeting next month in Abu Dhabi, United Arab Emirates, according to Dow Jones Newswires. Energy Secretary Samuel Bodman, speaking at the World Energy Congress in Rome, said he has asked OPEC to increase production.

Traders were awaiting the Energy Information Administration's weekly inventory report, delayed until Thursday this week due to Monday's Veteran's Day holiday.

The report is expected to show that U.S. crude oil inventories fell by 300,000 barrels last week, according to the average estimate of analysts polled by Dow Jones. Gasoline inventories, on average, likely fell 100,000 barrels, while distillate stocks were expected to fall 300,000 barrels. Refinery use likely rose 0.7 percentage point to 86.9 percent of capacity.

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Associated Press writers Pablo Gorondi in Budapest and Gillian Wong in Singapore contributed to this report.