Is $6 Gas a Possiblity?

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Here’s the pessimistic side of the story we ran on Wednesday regarding gas prices.

Is $6 gas a possibilityThe fact that the American dollar is falling in price could drive prices higher at the pump, maybe as high as $6.50, says a CNBC report.
If we get a couple of hurricanes in the wrong place and weakness in the dollar continues into the summer driving season, “prices could go up in a quasi-exponential manner,” said strategist Richard Hastings of Global Hunter Securities, Charlotte, N.C.

A weak dollar is responsible for about $1.31 of the cost at the pump, which currently is an average $3.83/gallon, according to AAA.
With a weaker dollar and hurricanes, Hastings says gas could go to $6.50 a gallon over the summer.

Another economist at Euro Pacific Capital also cited a strong correlation between the falling dollar and rising oil prices in the U.S. Both analysts expect the dollar index (which weights the dollar against 6 other currencies) to continue to fall by about 3 percent.

But other analysts, including Goldman Sachs, foresee a correction in gas prices later this year. Also if Americans curtail their driving, as they did in 2008, then demand for gas could drive prices downward. (See our story here).

For more on $6 gas see the CNBC story here. –Amy Gilroy

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