OIL PRICE DROPS $3; GERMANS PAYING $8.00 PER GALLON FOR GAS

Crude oil prices dropped about $3.00 per barrel yesterday as the U.S. dollar strengthened a bit and traders waited to see what the Federal Reserve will do with interest rates at their meeting later today. Most analysts believe that a quarter-point rate cut is already factored into the oil price and that if the Federal Reserve makes no cut, oil could decline further as the U.S. dollar strengthens.

Think $3.79 per gallon for gasoline is high? Germans are paying the equivalent of roughly $8.60 per gallon for gas now.

From MSNBC:

It is an everyday lottery when it comes to fuel prices at German gas stations. Prices for regular unleaded and diesel gas bounces up and down, often changing twice on the same day. And drivers in this car-loving nation are unhappily dealing with increasing prices at the pump.

Record prices on the international oil markets have driven gas prices across Europe sky high, with a gallon of unleaded gas costing about $8.60 per gallon in Germany. (In Germany, gas is sold by the liter with one liter of unleaded fuel selling for an average of $2.29)

The high prices hit people where it counts – in the wallet.

GAS PRICES AT INFLATION-ADJUSTED HIGH

The price for a gallon of gasoline averaged $3.508, surpassing the inflation-adjusted high of $3.413 of 1981.

From USA Today:

The average price for regular gasoline across the USA was a record $3.508 a gallon Monday, eclipsing the inflation-adjusted peak of $3.413 set in March 1981, when the average was $1.417, according to the U.S. Energy Information Administration.

Separately, AAA and the Oil Price Information Service reported a U.S. average of $3.503 Monday, up 1.2 cents overnight and first time above $3.50.

The two surveys emphasize what Americans already know: However it's measured, gasoline is more expensive than it's ever been. That hurts.

OIL TOPS $115 AS U.S. DOLLAR NEARS $1.60 PER EURO

Oil traded at over $115 per barrel yesterday and early today as the U.S. dollar sank to nearly $1.60 per euro. Some are $3.80 per gallon retail for gasoline in the near future.

From AP via MSNBC:

Crude oil futures fluctuated Thursday after moving past $115 per barrel and hitting an all-time high in overnight electronic trading on a weaker dollar and supply concerns.

Overall, crude prices have jumped more than 4 percent this week, in part due to the falling dollar, as well as a host of supply and demand concerns in the U.S. and abroad.

The combination of all these factors will push oil prices even higher in coming weeks, said James Cordier, president of Tampa, Florida, trading firms Liberty Trading Group and OptionSellers.com.

"I think we're going at least to $125 (per barrel)," Cordier said. "That'll probably translate to about $3.80 (a gallon for gasoline) at the pump."

WHERE WILL GAS PRICES GO?

There is quite a bit of debate over the direction of gas prices as we prepare to enter the high-demand spring season. Some analysts believe gas prices may go over $4.00 per gallon, but others cite huge inventories as a reason for their belief that gas prices will fall more in line with the Energy Department's prediction of $3.40.

From AP via BusinessWeek:

Gas prices jumped Friday to their highest level since June, a possible preview of what many analysts believe will be a record spike in pump prices this spring.

But the current price surge could be short-lived. While gasoline has risen sharply in recent days in response to oil's dramatic climb to a new record above $101 a barrel, gas supplies have quietly grown to their highest level in 14 years.

Many analysts believe gas prices will rise this spring to new records near $3.75 or $4 a gallon. But not everyone agrees.

[President of energy consultancy Ritterbusch and Associates, Jim] Ritterbusch, for example, thinks the high level of supplies, and an eventual decline in oil prices, will pull pump prices down. He doubts prices will rise as high as $3.75 without a major overseas supply disruption or domestic refinery outage.

CME AND NYMEX IN TALKS

According to published reports, the Chicago Mercantile Exchange (CME) and the New York Mercantile Exchange (NYMEX) are in talks about an $11 billion merger that would create a giant energy trading marketplace.

From The New York Times:

In what the two said was a 30-day exclusive negotiating period, the firms said they are discussing a takeover of Nymex by CME. The Chicago exchange would pay $36 in cash and .1323 in CME stock per Nymex share, or about $119.22 based on Friday’s closing price. That represents an 11 percent premium over Nymex’s closing share price Friday of $107.16.

CME will keep Nymex’s trading floors in lower Manhattan and would buy back the exchange’s 816 memberships for a maximum of $500 million.

Both exchanges said that the discussions are early and that any final deal may differ from those terms.

GASOLINE SUPPLY AT RECORD LOW

From USA Today:

U.S. gasoline supplies are the lowest level ever recorded in terms of demand, just 20 days of average fuel consumption, the Energy Information Administration said Wednesday.

"This is even fewer days than seen following the hurricanes in 2005," the EIA said in its weekly review of the oil market. "While the absolute level of total gasoline inventories has been slightly lower a few times in recent years, when the level of demand is taken into account, it has not been this low before."

The low gasoline inventory will not likely cause a sharp spike in retail fuel prices, but will limit the usual decline in pump prices after this weekend's Labor Day holiday, the EIA said.

EIA PREDICTS $2.87 AS HIGH FOR SUMMER GAS

The Energy Information Administration issued a report indicating the gasoline will average between $2.81 per gallon this summer. That compares favorably to the $2.84 Americans paid last summer. In addition, the group predicted that the summer high for gas will be $2.87 in May, but many analysts think that the EIA prediction is too low. Gas prices averaged $2.80 last week.

USA Today