8 reasons why gas will hit $5 a gallon this year

 

March 2012

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Produce Season Updates

   

The recent winter challenges of freezing temperatures in Florida and rain in central Mexico are fading. Florida's strawberry production is now slowing and fruit sizes are falling.


Iceberg lettuce from the California and Arizona deserts have overall excellent quality. Today's lettuce offers good weights, color and shelf life upon arrival. 

 

The near-term weather forecast called for continuing ideal growing conditions well into the week of Feb. 27. This is an excellent time to highlight broccoli from the Southwest desert. 

 

Desert lemon production had been down as much as 75% this winter season due to the harsh freeze.

 

Navel quality is superb and production is running at full capacity. Sizing will gradually increase into March. The market is reasonably priced and this remains a wonderful time to highlight Navel oranges from California.


 
 

Read more updates here.


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1. Strait of Hormuz
About 20 percent of the crude oil produced in the world is shipped through the Strait of Hormuz, and Iran has threatened to shut down shipping traffic through the Strait.
 

2. Iran
Because of the embargo against the nation due to nuclear weapons violations, the U.S. has pressured large oil importers such as Japan to act to isolate Iran by cutting their imports. Japan has agreed to cut its Iranian crude imports by 20 percent. But as the world's third largest oil importer, Japan indeed will have to get its oil somewhere other than Iran -- which will put more pressure on current production.


3. Refiners raising prices
Many refineries are public companies that do not have much appetite for posting ongoing losses. To avoid losses, refiners will have to increase gasoline prices.


4. Other geopolitical risks

Internal conflicts in Nigeria (the 14th largest producer of oil in the world), Venezuela (the world's 11th largest producer of crude) and other conflicts across Africa in Bahrain, Libya, Iraq, Nigeria and Yemen could all cause rises in gas prices.

 

5. The EU may save itself
Deepening financial and economic trouble in Europe would drop demand for oil there. However, if leaders in the region can settle on mechanisms to protect nations with financial problems from default, national budgets will not be cut to extraordinarily low levels -- levels that would otherwise kill both consumer demand and business demand for oil.


6. U.S. economic recovery
Demand for oil-based products across the entire economy will pick up with any recovery.


7. Summer
In the U.S., summer vacation driving has historically boosted demand for gasoline.


8. Supply risk
In December 2011, OPEC members produced nearly 31 million barrels a day, cutting the cartel's spare capacity capability from 3.18 million barrels per day to 2.85 million.
 

Read the full story here.

Kristina Pein

Senior Marketing Specialist

813.793.4851

kpein@reedtransport.net

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