$5 Gas Prices? Think Again Says Flynn

$5 Gas Prices? Think Again Says Flynn, With gasoline prices now up 20 consecutive days, the coverage and concern is reaching fever-pitch, turning us all into speculators of how high pump prices will rise.

"We're probably not going to hit $5 a gallon," predicts Phil Flynn, FOX Business Network contributor and oil analyst at PFG Best. Flynn calmly says we're getting way ahead of ourselves with all this price per gallon talk, prior to couching his prediction in the necessary caveats about Iran, the Middle East, and nuclear conflagration.

Flynn points out that the overlooked factor in all this gas talk is the impact of U.S. refinery capacity. It's been more than a generation since a refinery was built in the United States. According to Flynn the remaining refiners are going into maintenance.

"EPA regulations could close more (refiners)," he says, leading to a glut of crude oil, but a backup in domestic places to turn black gold into gasoline. Flynn also makes reference to the U.S. devaluing currency, a factor which is constantly putting upward pressure on every commodity extant.

Ultimately all oil conversations lead to Iran, of course. Flynn says he's seeing "the biggest risk premium in the price of oil since 2008."

By way of illustrating the skittish nature of markets, he attributes a New York Times article over the weekend suggesting Iran may not be on the path to nukes as the catalyst for oil's dip on Monday morning.

To traders, most of this is just wildly unpleasant noise. What matters is the trade. We all understand that if Israel and Iran exhange warheads the price of crude will go higher; which will be the least of the world's problems in such a scenario. What if the worst doesn't happen.

"If the worst case scenario doesn't happen we're going to a bunch of oil sitting around in tankers that will put significant downward pressure on prices," he says. How significant?

If Iran is resolved, we could see an unwind of $20 a gallon in the price of WTI crude and gas prices at the pump under $3 a gallon.

via: yahoo

Flynn sees the current crude price action as little more than a run-of-the-mill panic. We've seen these things before, he notes. "When panic passes prices really fall."
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