Fuel prices.

A confluence of factors are likely to give consumers sticker shock at the gasoline pump this summer. Seasonal driving habits, the 'expanding economy,' limited supplies of certain blends and unexpected output cuts by major producing nations will likely propel U.S. retail prices well past their record high.

Note: Under Bush -- the MBA president, and whose policies have been 'oil friendly' have somehow already managed to drive gasoline prices to their highest levels ever.

"OPEC's decision ... is one more reason on an already lengthy list of why U.S. consumers are likely to pay the highest gasoline prices on record this year," AAA spokesman Geoff Sundstrom said.

Gas prices "will certainly breach" the $2 mark on the back of OPEC's announcement, said Kevin Kerr, a senior trading director at KWEST Trading International. "At the same time, the economic recovery in the United States and other parts of the world ... and the draw on existing energy supplies could be disastrous."

Since the oil market didn't anticipate OPEC's dramatic moves, "the shockwave will be felt all the way to the pumps," Kerr said.

A survey of the five market analysts found all agree that retail gas prices will, at the very least, hit a new record this year.

Indeed, if crude inventories don't increase, and if OPEC votes to cut another 5 percent from its output, unleaded gas prices could reach the "upper limits of $2.75 to $3 this summer," said John Person, head financial analyst at Infinity Brokerage Services.....

......"Over and over again, OPEC raised crude oil prices ... saying the weaker dollar brings member nations lower revenues because oil is traded in dollars," Kerr said. "It isn't rocket science to figure out they will likely do this again with the dollar reaching new lows."

Fimat USA analyst John Kilduff sees a different driver. He said the dollar's decline coincides with a much bigger factor for oil prices: "The lowest U.S. crude-oil inventories in a generation."

Yet Tom Kloza, chief oil analyst at the Oil Price Information Service in Lakewood, N.J., believes the 2004 gasoline price rally won't be about crude, but about the level of gas supplies. "When traders fear a product may be 'short' as the season approaches, or when it actually is short or tight within [the] season, prices tend to migrate toward hyperbolic numbers.".....

......While Infinity's Person sees prices peaking at $3 in some metro areas in the worst of circumstances, OPIS' Kloza sees average prices rising above $2 but reaching the high-$2 range for only a brief period if at all. If any region sees prices near $3 a gallon, it would be already high-priced markets like California and Chicago and would occur only after a refinery outage or two, he said.

"The gasoline market will have an irregular heartbeat ... racing at times and resemble brachyadia at others," Kloza said. "The overall retail average for the year will be the highest ever," but there will a huge gap between the highest and lowest prices, which could still run as low as $1 a gallon in some states.

Fimat's Kilduff said it would be difficult for average prices to climb much higher than $2. "Some sort of government intervention would occur at levels around $2.25," he said, though he did accept the possibility of $3 gas in certain snag-prone areas, such as California.

Enercast's Ameko argued that federal and state politicians would likely intercede rather than sit idly by should prices skyrocket.

"Going into an election year, $3 retail prices would spell disaster," Ameko said. He doesn't expect demand to be strong enough to lift prices above $2.25, and suggested prices will average around $2.15.

Much more at link

I have a 50mpg vehicle as a back-up. I think I'll keep it.

If petroleum prices spike, there is no sector of the economy that is immune. Higher energy costs raise the prices for all goods. Given the weak dollar, this scenario is almost certain to play out at some level. When people are already at record levels of consumer debt, they aren't likely to spend on goods and services if their energy costs are far greater.

Will politicians intercede? Those anti-regulation Republicans will surely do some hand-wringing and soul searching before taking action. Given that this is an election year, I'd say that the odds are good for government intervention. This taxpayer subsidy will have to be reflected in higher taxes at some point in the future.

This has the potential to put the skids on the recovery. A few months of gas prices in the $2+ dollar range will be a huge burden to the economy. I wish I could tell you in dollar terms, but even that would be using forecast numbers. These include where the dollar is likely to be against other currencies, and how much higher prices will stifle demand.

It could be a long summer for an incumbent president.