According to Gulf Oil CEO Joe Petrowski, crude prices are expected to fall to the”the mid-80s” and retail gas prices too will tumble below $3.50 a gallon here in the U.S. due to “demand that is still down.” Petrowski continued, “I think we’ll probably go down right through Labor Day or at least be under $3.50 on a national basis. We could get to $3.25. I think it would be very hard barring a real economic slowdown or double dip for us to go much below $80” per barrel (from CNBC).”
The Gulf Oil executive’s comments are even more encouraging because his interview took place before the IEA announced this morning that it would ramp up production by releasing government oil reserves. 50% of the commitment will come from U.S. strategic petroleum reserves. Markets did not take kindly to the news, with the Dow down by as much as 220 points in trading earlier today, led by a swooning energy sector (NYSE:XLE).
Petrowski urged government officials to consider alternative solutions to supply side bottlenecks in gasoline production that have kept crude prices high. “They [legislators] want to talk about wind, solar, all the new and sexy energy sources… The reality of the situation is, 80 percent of the BTUs in this country come from carbon-based, and I think Washington realizes if we want to get this economy going we’ve got to address some of the bottlenecks we have to supply. I sense we’re moving in that direction.”
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Goldman-Sachs (NYSE:GS) also weighed in on oil prices today, lowering its projections on crude prices by $10-12 per barrel and setting revised three month targets at $105-$107. Goldman’s revisions were prompted by the IEAs decision to tap strategic reserves.