Oil prices have seen a rapid climb in recent months, but far from being the end of a bullish run, oil expert Tom Kloza believes a number of forces could push crude even higher. As the price for crude rises, consumers and businesses will feel the pinch as gasoline could exceed $3 a gallon by summer time. Kloza, the Oil Price Information Service global head of energy, claims that “The bulls aren’t just in charge, they’ve got a hammerlock on this market,” suggesting that the price of crude could rise as high as $100 a barrel, according to CNBC.
Bullish Oil Outlook
The price of West Texas Intermediate (WTI) was trading at just above $71 a barrel on Tuesday at 3pm EST, up nearly 18% since the start of the year. If that price does rise to $100 a barrel, that would mean at least another 40% rise from the benchmark’s current price. (To read more, see: 3 Oil Stocks Ready to Rally.)
In addition to the swift rise in global oil demand, Kloza cites a number of geopolitical factors that are currently putting pressure on oil supply: 1) a potential military response from the U.S. if Iran resumes its nuclear program; and 2) a loss of export capability in Venezuela.
While Kloza sees a 50-50 chance that the average price for unleaded gasoline will surpass $3 a gallon this summer, others suggest that gas prices could rise even higher, to more than $4 a gallon. Such a rise would push up fuel costs for households and businesses alike, with businesses likely to attempt passing on the higher costs to consumers. But, the overall impacts will be varied. (To read more, see: 9 Energy Stocks Poised for Big Breakout As Oil Surges.)
Consumers will no doubt find themselves with less cash to spend, and may start opting for more fuel-efficient vehicles. The restraint in consumer spending may be offset by business spending on new capital investment. The rising oil prices should cause a substantial pickup in shale oil production and investment, which should help to keep the U.S. economy afloat if consumer non-energy related spending does take a dive.