May 26

Robert Hirsch, senior advisor for Science Applications International Corporation, sat down with MSNBC’s Alex Witt to discuss the possibility of an upcoming oil crisis. Hirsch says that gas could reach $15/gallon within a few years because it is “essentially certain” the world has reached the maximum levels of oil production.

“The problem is that there’s not that much oil left in the ground,” Hirsch says. “What we’ve done is been very fortunate to have oil production increase as our economies have developed over the past decades. And now we’re reaching a point where we’re about to get, or we may be, at the maximum world oil production. After that, oil production will then decline and prices, of course, will continue to do what they’ve been doing recently. So what we’ve got today may be the ‘good old days.’”

Hirsch addressed the timeframe in which the US could see $15/gallon gas: “It could happen within a matter of months. It could happen within a matter of a few years. But it’s essentially certain that we are at the maximum of world oil production. And after that, we’ll go into decline, and when there’s much less oil available, then, of course, the price of oil is going to increase dramatically.”

Fuels, heating oil, and consumer products that rely on petroleum will all be impacted by the decline in world oil production. Hirsch estimates the world GDP declining at the same rate as oil production.

This video is from MSNBC’s News Live, broadcast May 24, 2008.

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By David Edwards
Posted May 24th, 2008 at 10:08 am

Source: The Raw Story

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May 23

Goldman Sachs analyst Arjun N Murti is no ordinary forecaster. But in March 2005, when crude oil was trading at $55 a barrel in the global market, he was scoffed at for predicting that oil prices would experience a ‘super spike’ and cross $105 a barrel.

No one is laughing at him anymore. In fact, people are shivering at his latest forecast: crude oil prices may touch $200 in the next two years, says a New York Times report.

With oil prices smashing past $135 a barrel for the first time on Thursday, continuing the astonishing rise following unexpected drops in US crude and gasoline stocks in a tight market, the 39-year-old Murti’s prediction seems frightening close to turning into reality.

Although other analysts argue that market speculation may bring down the prices drastically, Murti is of the opinion that that the oil price will definitely stay above $100 till 2011.

This, says the NYT report, is indeed a matter of concern for the US where with $200 oil, gasoline could cost more than $6 a gallon. Continue reading »

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Apr 15

NEW YORK (AP) — Crude oil prices rose to within a penny of $114 a barrel Tuesday, setting a new record as concerns mounted about global supplies. U.S. retail gasoline and diesel prices also struck new highs.Traders honed in on a report by the International Energy Agency that said Russian oil production dropped this year for the first time in a decade. The report raised concerns about whether the key oil-producing nation will have enough supply to help feed growing global demand.

“In an emotionally driven market like we’ve got now, it just doesn’t take much in the way of a headline to prompt a psychological response,” said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Ill. Continue reading »

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Mar 06

If you’re looking for a sure sign the U.S. economy is headed in the wrong direction, all you need to do is look at the skyrocketing price of “recession-proof” foods: pizza, hot dogs, bagels and beer.For many Americans, the credit crunch and the mortgage mess have left their pocketbooks – and their cupboards – bare. These same consumers, many living paycheck to paycheck, have relied on these cheaper foods to keep their expenditures down. Not anymore.

In the past few months, the news has gone from bad to worse:

* Pizza makers have seen their cheese costs soar this year from $1.30 a pound to $1.76 a pound. Even worse, the flour used to make the dough has gone from $3-$7 dollars a bushel to $25 a bushel in less than a year.
* Beer makers have been forced to raise their prices because of the skyrocketing price of hops – one of the principle ingredients. The price of hops has gone from about $4 a pound in September to $40 a pound. The price of barley, beer’s other main ingredient, has nearly doubled.
* Bagel shops have struggled to hold the line on prices and keep their customers. The exploding wheat prices have made the $1 bagel a fact of life in big cities such as New York. Donuts are averaging $1.50. And many shop owners fear a wheat shortage will drive prices even higher.
* Even the lowly hot dog is getting more expensive. Gray’s Papaya, a New York hot dog institution, will be jacking up the price for its $3.50 “Recession Special” – two hot dogs and a 14-ounce drink. Nicholas Gray, owner of the frankfurter chain, has yet to set the price increase, but he indicated it is coming soon.

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Overall, retail food prices rose 4 percent last year – the biggest jump in 17 years. The USDA officials predicted another 3 percent to 4 percent increase this year and continuing price hikes, faster than the pace of inflation going into 2010. And the price pinch has hit the lower-income shoppers hardest.

Why is this happening? Call it the perfect storm of inflationary pressures.

Bob Goldin, executive vice president of Technomic Inc., a food industry consulting firm, described the cost increases as a “disaster scenario,” with no real end in sight and limited ability for most to pass on the bulk of the costs to consumers.

Surging energy costs have driven up the price of transporting goods from farm to storefront. The national average for a gallon of gas jumped to $3.164, creeping closer to last May’s record of $3.227, according to AAA and the Oil Price Information Service. Diesel prices jumped 1.5 cents to a new record national average of $3.642 a gallon.

While most Americans fuel their cars with gasoline, most of the products they buy are transported by trucks, trains and ships that burn diesel. While gas prices are unlikely to rise as high as $4 a gallon, diesel may well pass that psychologically important level this spring, boosting prices of virtually every consumer product, said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, New Jersey.

“It’s everything that gets shipped,” Kloza said of diesel fuel’s impact on the economy. “That is the one that is much scarier.”

Another reason for the sharp hike in food prices is the increasing demand for ethanol, which has driven up the price of corn – and at the same time created a shortage of wheat as farmers shift their crop to the more lucrative corn.

“There are several reasons [for higher food prices], but at the core is corn, the largest and most important of agricultural commodities,” said Bill Lapp, president of Advanced Economic Solutions.

Which brings us back to the price of flour – and the pricier pizza. Jimmy Ferrell, owner of the four Fat Jimmy’s pizza restaurants in Louisville, Ky., said the price of flour has forced him to pass the cost onto his customers. “You have to raise (prices) a couple times a year just to keep up,” he said.

Ferrell thinks the rising flour prices have hurt small operators more than national chains.

“The national chains have a lot more pull and they can negotiate prices. I don’t think we have the same buying power that a Papa John’s or a Domino’s obviously has.”

Food industry consultant Goldin doesn’t see a light at the end of the tunnel. “There are no simple solutions,” he said. “The trend will be to reduce product costs, and some of that may very well affect quality.”

So, how can budget-conscious consumers stretch their dollar? There is one – albeit artery-clogging – alternative.

Fast food companies, looking for a way to attract budget-conscious customers, are increasingly offering more food for less money. The “dollar-menu” option is growing at chains such as McDonald’s, Burger King and Quiznos.

That’s good news for diners like Boston resident Shekia Scott. While lunching with friends at a Burger King, Scott said higher prices for food and gas were hurting her budget. But, she added, “the dollar menu’s been a help.”

So there you have it. Your best option for cheap eats is a gut-busting McDonald’s double cheeseburger for a buck. Makes you want to cry in your beer … if you can afford it.

The Associated Press and CNBC contributed to this report. By Al Olson

MSNBC updated 11:18 p.m. ET Feb. 29, 2008

Source: MSNBC

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