As summertime approaches, so do rising fuel prices. This time around, the price hikes are tied to rising world oil prices. When gas prices dropped from peaks of over $4 per gallon last summer to under $2 at the end of the year, world-wide demand reductions resulting from the financial collapse were to blame. Oil traders now seem to think that the economy will be recovering in the coming months, and have been bidding up prices in recent months. This week prices have $63 per barrel and Saudi Arabian Oil Minister Ali al-Naimi thinks the economy can sustain prices at $75-80 and expects prices to hit that level by the end of the year.
OPEC is expected to hold production steady for now in an attempt to keep prices up. Saudi Arabia wants prices up to fund development of new production, while Venezuela wants higher prices to pay for President Hugo Chavez's aggressive social programs.
With the aggressive new CO2 emissions standards announced by President Obama last week, higher prices will definitely help drive demand for more efficient vehicles. The problem is that if prices are too high before the economy picks up again, the current situation - where no one is buying any vehicles at all - will continue. As for the long-term, a new study predicts that prices will hit $110 per barrel in 2015 and then maybe $200 per barrel in 2030.
[Source: Reuters, Green Car Advisor]