Gas Prices Reach Highest Springtime Level Ever

Gas Prices To Hit $4 Nationwide, But Not Because Terrorist is Dead

ByABC News
May 2, 2011, 11:40 AM

May 2, 2011 -- Crude oil prices fluctuated Monday, following President Obama's announcement that U.S. Navy SEALs had killed al Qaeda leader Osama bin Laden. Prices first fell, then rose, then fell again, landing at a four-day low: $113 a barrel on the New York Mercantile Exchange.

The U.S. Department of Energy reported late Monday that gasoline prices at the pump averaged $3.96 a gallon nationwide, up a little over 8 cents from a week ago. The price hit $4 a gallon or higher in 12 states plus the District of Columbia. AAA and other market watchers said they expect $4 to become the norm nationwide by the end of this week.

Petroleum expert Andrew Lipow, speaking with ABC News, said the price of crude fell by two dollars immediately following the President's announcement, then, by mid-morning, had climbed 50 cents. He attributed the initial drop to concerns that al Qaeda might stage reprisals.

Lipow, president of Lipow Oil Associates in Houston, said he expects the effect of bin Laden's death to be mostly positive. "It's good news that the threat of terrorist action against oil producing, refining and transportation facilities around the world now seems to be reduced," he said. Longer-term, he thinks there will be little if any relation between bin Laden's death and what consumers pay at the pump.

Stock markets around world rallied, though in the U.S., the S&P 500 ended down 2.39 points, a drop of 0.18 percent. The demise of bin Laden, said Lipow, gives the world "one less thing to worry about. Markets are rallying and people are saying they see better times ahead. With greater optimism, however, comes increased petroleum demand. Demand around world is at record level. We're seeing huge growth of demand in China. And after that, in India, Saudi Arabia and Brazil. While U.S. petroleum demand might be stagnant, the rest of the world needs more."

Also putting upward pressure on prices, he says, is the fact that Libya, wracked by civil war, for now has suspended oil production. The country exports its crude primarily to Europe, not to the U.S. But Libyan crude, made into gasoline in Europe, is then exported to the U.S. eastern seabord. Indirectly, says Lipow, "We get 10 percent of our gasoline from Libya. Their oil will continue to be off the market for some time." Meantime, he said, many of oil-producing regions of North Africa and the Middle East remain in turmoil.

Lipow predicts gasoline will peak at $4 a gallon over the next couple of weeks, then slowly work its way down in price. Barring further turmoil in producing nations, "by the end of the year it might come down 25 cents a gallon -- but you really would need today's turmoil to resolve itself."