fuel efficiency
The first hint of what might be in store came last month when Opec announced its decision to withdraw 1m barrels of crude oil a day from the market. Opec is worried about the weakening value of the dollar: it has lost one-third of its value in just under two years. Since Opec sells oil for dollars, the oil-producing countries are losing precious revenue as the value of the dollar continues to erode. And because oil-producing countries then turn around and purchase much of their goods and services from the EU and must pay in euros, their purchasing power continues to deteriorate. (The euro is currently valued at $1.23.)
How will the weaker dollar affect oil prices? Philip K Verleger, the dean of US oil market analysts and a visiting fellow at the Institute for International Economics, suggests that "oil-exporting countries may decide to adjust their price band to reflect the falling value of the dollar". If the dollar continues to slide, he warns, we could see oil prices rising from the current $38.18 a barrel to a record high of $40 by midsummer.
There are other dark clouds on the horizon. US crude oil inventories are at the lowest point since the mid 70s, and the retail gasoline market is operating with little reserve margin as we move into the summer months, where more travel will increase demand. The dwindling oil reserves are made worse by the White House decision to replenish the strategic petroleum reserve, further reducing the amount of gasoline available.
Verleger says gasoline could climb as high as $3.50 a gallon before leveling off at $2 by the autumn. How high prices eventually soar could depend on still other factors, including potential oil disruptions in Venezuela and the Middle East.
Jeremy Rifkin/CommonDreams/Guardian UK Mar.24.04
