Is $6 A Gallon Gas On The Horizon?

The business news cable channel CNBC raised some eyebrows this week with a story quoting at least one economist who thinks motorists could easily be paying $6 a gallon for gas this summer.

Is this for real?

"All we have to have is a couple badly placed hurricanes which could constrain some of the refinery output capacity in some key locations," Richard Hastings, strategist at Global Hunter Securities in Charlotte, N.C., told CNBC this week. "If you get weakness in the dollar concurrent with the strong driving season concurrent with the impact of one or two hurricanes in the wrong place, prices could go up in a quasi-exponential manner."

Remember Mid-East turmoil?

A few weeks ago, all the oil analysts were pointing to the political turmoil in the Middle East as the main driver of rising oil prices. There was concern the turmoil would eventually take down oil-rich regimes friendly to the West. Now, hardly anyone mentions Middle East violence as a reason for high prices anymore.

The reason du jour for sky-high oil prices is the falling dollar. The greenback has been falling like a rock in recent days, making the cost of everything paid for in dollars – like oil and gold – more expensive. The dollars is suffering at the hands of currency traders worried about the Federal Reserve policy of pumping more dollars into the system to stimulate the economy.

Then, there are the speculators, who have pumped billions into the oil futures market with no intention of ever taking delivery of a drop of oil. They are hoping the price keeps rising, so they can sell their positions at a profit. Of course, the refiners who do plan to take delivery of the oil have to pay the higher price as well, resulting in higher gasoline prices.

Look at the last six months

With gas prices over $4 a gallon in many areas, maybe it's not a stretch that the price could rise by one-third if there actually were a supply problem, caused by summer hurricanes. After all, prices have risen dramatically in the last six months.

In early October, the average price of self-serve regular, as measured by AAA, was $2.79 cents a gallon. Today, it is $3.84, an increase of $1.05 a gallon, or slightly more than 37 percent. If that present trend was matched over the next six moths, the average price could be $5.26 a gallon, with significantly higher prices in some states.

The obvious question is whether there is any financial fraud involved in the sky-rocketing prices.  U.S. Attorney General Eric Holder today announced the formation of a task force to focus on fraud in the energy markets.