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Gratitude

Gas Prices on Track to Hit $7 a Gallon Says Igor Purlantov

Mon, 5 Mar 2012 13:26:42 EST

Drivers in the United States have long had the luxury of relatively inexpensive gasoline prices, especially when compared to other countries with similar gross domestic product (GDP) per capita living standards says Igor Purlantov.  Even when looking at the top ten cheapest countries for gasoline prices (Venezuela, Iran, Saudi Arabia, Libya, Qatar, Bahrain, Turkmenistan, Kuwait, Oman, and Algeria) the United States is still relatively inexpensive when viewed from a purchasing-power-parity (PPP) per capita basis.  This is all about to change according to Igor Purlantov who says that gas prices have already reached their highest levels in history and are set to continue rising.

Current supplies of crude oil around the world are already tight while demand in countries such as China, Brazil, India and Russia continue to surge with increased sales of automobiles.  This increase in demand for gasoline, diesel and other transportation fuels accounts for half of the world's total consumption.  This increasing demand is coming at a time when countries such as Saudi Arabia, Libya and Nigeria are reducing output and exports of crude oil.  Couple this with reports that some oil reserve estimates in Saudi Arabia are fraudulently overstated and you have the perfect storm for a continued increase in oil prices that could reach $200 a barrel says Igor Purlantov. 

Aside from the claims of fraud in over reporting of untapped oil reserves that is akin to overstated cash assets in a ponzi scheme, there is also the more mundane tendency to count natural gas liquids as part of the total output that is skewing actual oil capacity estimates around the world.  When you remove natural gas liquids, the global supply of oil is more accurately reflected and shows that supply is extremely limited and unlikely to grow much more to meet the increasing demand in developing countries according to Igor Purlantov.  Although natural gas can occur on its own, much of the world's natural gas is found together with oil and despite that natural gas liquids found together with crude oil has been increasing, there has not been much growth in oil output.  Unfortunately, natural gas liquids are currently not a substitute for oil and cannot be used to meet the growing demand for gasoline, diesel or jet fuel around the world. 

These findings all come at a time when there is an increased depletion of existing oil fields around the world with little to no investment in new fields.  As it becomes more inevitable that the days of relatively cheap gasoline in the United States are over, the question becomes at what point is the price so high that it sends the economy back into a recession.  According to Igor Purlantov, it is difficult to pin point an exact breaking point price, but at $7 a gallon more than 10 million vehicles would be forced off the road as households and businesses struggle to make ends meet.  For some this may be a good thing in terms of the environment, but from an economic point of view, it could be devastating.


 
Igor Purlantov is an expert on business and politics across emerging markets.   Mr. Purlantov has worked extensively in various emerging countries throughout Europe, Asia and Africa with both public and private companies as well as local governments.  You can read and learn more about his work on www.purlantov.net


Source: WebWire



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