Tags: Global | High | Gasoline | prices

Former Shell Chief Hofmeister: Blame Global Demand for High Gasoline Prices

Tuesday, 21 February 2012 12:59 PM

U.S. consumers may scale back at the pump this summer to escape high gasoline prices, but demand in other parts of the world are going to keep fuel prices high, says John Hofmeister, former head of Shell Oil's U.S. operations.

The price of U.S. crude, West Texas Intermediate, is currently hovering around $105 a barrel, while its European counterpart, Brent, is up around $120.

Expect that gap to narrow, and expect gasoline prices to flirt with $5 at the pump soon.

"I think we are headed for $120 or $120 — West Texas. Brent is already up around $120," Hofmeister tells CNBC.

Demand may be down in the U.S., but it's not worldwide, which will keep prices on the upswing.

"Demand continues to rise in Asia and whether we use less or not doesn't matter."

China, for example, will see its economy grow by over 8 percent, and 20 million cars were sold there last year, most from new consumers, Hofmeister adds.

President Barack Obama, meanwhile, claims his government is allowing companies to extract more fossil fuels to ease energy prices, but in reality, it's allowing for more production of natural gas liquids from oil shale, which won't help lower prices at the fuel pump.

"We're well below 7 million barrels a day. We used to produce 10 million barrels a day in the '70s and the '80s. He's done absolutely nothing as president to foster a pro-energy, a pro-consumer program. I'm a Democrat and I'm fundamentally frustrated at the president's unwillingness to recognize how important oil and gas are to the U.S. economy," Hofmeister says.

"And so he has done nothing but strangle through regulation the efforts — he's done nothing to expand new territories."

Experts agree that gasoline prices are set to soar, including Dan Dicker, oil trader and author of "Oil's Endless Bid," who gives the chances that gasoline will hit $5 at one in three.

Iran remains defiant in the face of sanctions from the west, and has already cut off supply to France and the United Kingdom.

Fears are growing meanwhile that Israel may be mulling a unilateral attack on Iran despite comments from U.S. military officials that Tehran would likely be willing to reconsider its policies.

"This price juggernaut has taken on a life of its own since the Iran/Israeli threat flinging began and [the] boycott/sanctions war continues to ratchet upwards, and it's been made worse by the big run in stocks since the start of the year," says Dicker, according to CNNMoney.

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Tuesday, 21 February 2012 12:59 PM
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