A holiday-shortened week didn’t stop NYMEX crude oil from reaching new highs, and the second week of July will commence with a WTI price over $145/barrel.
The 2007 rally produced a 50% gain in price over twelve months. In 2008, it took just six months and three days to produce the same 50% gain for crude. According to some top investment banks, the market could produce a further 50% gain in the next three months, targeting a peak for WTI in the neighborhood of $218/barrel.
That would mean a substantial increase from today’s $4.10 per gal retail average price. If crude oil gets to $200 per barrel the national retail average would likely hit $5.60 per gal and put even more pressure on fleet managers around the country.
Demand is down about 2% from last year, and despite the decline prices are still rising. Commodities have been the hot investment vehicle for hedge fund managers producing large returns. In contrast stocks and real-estate have fallen out of favor with negative returns.
Some experts insist that the crude prices are overvalued, but with few players unwilling to be short in a rapidly rising market believe that prices will continue to expand.
Diesel prices could be above $5.00 by the end of the month. The national average is currently $4.80 per gallon and global demand for diesel is very strong. Diesel prices typically see a late summer rally in anticipation of the heating oil season and analysts believe that this year will follow the same pattern.
In addition to the pain caused by higher prices to fleet managers, less money in the pockets of consumers could mean less demand for goods and services. Americans collectively spent nearly $1.6 billion per day on gasoline in June. That was almost $100-million more than in May and more than $1 billion more than June of 2003.
