Energy tycoon Pickens predicts $3 gasoline within year
Apr 28, 2005 (Tulsa World - Knight Ridder/Tribune Business News via COMTEX) -- Energy tycoon Boone Pickens is known for making bold predictions about the price of oil and gas.
He's been right most of the time.
Pickens' latest prediction, though, may leave motorists a bit bug-eyed.
World oil production has peaked, and Oklahomas will be paying $3 a gallon for gasoline within a year, Pickens said Wednesday.
"We're getting ready to come upon some very serious energy problems for the world," he said.
Global oil output has peaked at about 84 million barrels a day, never to rise again, said Pickens, who spoke to the Rotary Club of Tulsa.
The problem is that world oil demand has been projected to rise to 87 million barrels a day this year.
"You can't get 87 out of 84. Something has to happen," Pickens said. "Demand has to come down, or supply must go up. I'm convinced that supply cannot go up."
Demand, he said, has overtaken the world's available supply of crude.
"If I'm right, the only way you can keep the price down is to oversupply the market."
Oil production in Saudi Arabia and Russia, the world's largest oil producers, has probably peaked. What's more, some of the oil Saudi Arabia is pumping into the market is low quality and useless to refiners, Pickens said.
Other large oil-producing countries are unstable, increasing the risk of a major supply disruption, he said.
Oil output from Nigeria is regularly interrupted because of strikes by oil-field workers. And Venezuelan President Hugo Chavez wants to sever all business ties with the United States, Pickens said.
As a result, oil, the feedstock for gasoline, may never again fall below $50 a barrel, he said.
"You'll see $3 gasoline in Oklahoma, I would say, within a year's time," he said.
The climb to $3-a-gallon gasoline may have already started in Tulsa.
Late Tuesday, many Tulsa retailers raised the price of regular-grade gas 12 cents to $2.15 a gallon. Some gas stations were charging $2.17 a gallon. By late Wednesday, prices were seen going down to $2.13.
Some people found the sharp jump in local pump prices puzzling because prices for oil and wholesale gasoline have been falling.
"We're not seeing price increases in Oklahoma City nor any other major city around the country," AAA-Oklahoma spokesman Chuck Mai said in an interview. "This seems to be isolated in the Tulsa market.
"I don't know of anything happening in the industry that would justify a jump of this nature."
The price of oil is down 7 percent this week. Oil closed Wednesday at $51.61 a barrel, down $2.59 on the New York Mercantile Exchange.
The average wholesale price for regular-grade gasoline sold in the Tulsa area has dropped to $1.978 a gallon. That's 17 cents lower than the dominant retail price in Tulsa.
Mai said $2.15-a-gallon gasoline in Tulsa is not sustainable and that prices likely will come down from that level pretty quickly.
The world consumes about 30 billion barrels of oil a year. But the number of large oil discoveries has plunged, despite improvements in oil exploration and production, Pickens said.
"We have not had a 1 billion-barrel oil field in the world in the last five years, and we're extracting 30 billion barrels a year out of reserves," Pickens said. "That does not fit."
The Energy Information Administration, the statistical arm of the Department of Energy, projects that worldwide oil demand will rise to 121 million barrels a day by 2025.
Pickens said the United States should stop using natural gas for power generation and begin using it as a transportation fuel.
"Natural gas is a great transportation fuel," he said. "It burns 86 percent cleaner than gasoline and 94 percent cleaner than diesel."
The switch, he said, would take about 10 years.
America should focus more on the use of coal and nuclear power to generate electricity, he said.
Pickens predicted that natural gas prices will rise to $10 per thousand cubic feet this summer if hot temperatures persist in the Northeast and Southeast. More gas would be needed during a hot summer because additional power would be required to keep homes and businesses cool.
Pickens came to prominence in the 1980s by raiding companies such as Gulf, Phillips and Unocal. The Texas oilman now oversees Dallas-based BP Capital, a successful energy hedge fund.
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