May 25, 2008
GASOLINE prices in overdrive, an unpopular president in the White House, a heated election on the horizon, inflation stirring and Iran looming as America's No. 1 nemesis - the summer of 2008?
Actually, such was the situation in the summer of 1980 as well, and one of the best oil analysts in the business says the parallels should not be ignored.
That analyst is Kurt Wulff, of McDep Associates, arguably the top oil guru in the business today.
And if Wulff is right, as he typically is - $4 a gallon gasoline may look like a day at the beach by the time the last Labor Day barbecue comes around. Wulff - a long time bull on the black stuff - is betting on another huge spike in oil stocks (and by association oil and gas prices) between now and Election Day.
That's what happened in the summer of 1980, when a basket of his oil plays jumped 68 percent from May to December.
What does that mean for prices at the pump? Although crude prices have risen an eye-popping 38 percent so far in 2008, gasoline is up 22 percent as margins for refiners have narrowed. That's not likely to last for long, as the ratio between gasoline and crude prices reverts to historic norms.
Perhaps there's solace in the fact that the Summer of 1980 heralded the peak in oil prices after the 1970s embargo. By 1981, prices were tumbling.
But back then, the Federal Reserve was aggressively raising rates (pushing the Fed funds rate to double digits) in an attempt to put the breaks on inflation of all varieties. Today, the Bank of Bernanke appears stuck in neutral with an extremely generous Fed funds rate of 2 percent.
Gasoline prices will hurt this weekend - the prospect for the rest of the summer is even more daunting.
TERRY KEENAN is anchor of Cashin' In, an investing program that appears on Fox News Channel on Saturday mornings at 11:30. E-mail terry.keenan@foxnews.com.
