Usually, I take pains in quoting prices for crude oil in dollars per barrel, and allude to gasoline or diesel with cents per gallon references.  But today, I’m going to make an exception, in the hopes of driving home a salient point that is constantly missed or misinterpreted. Herewith, almost all of the prices I’ll quote in the majority of this column will be in dollars per barrel.

   The price of oil futures dropped by $2.20 bbl today, fulfilling a warning made in this space during the last few days of Summer (see 9/20/2007 column for details). WTI crude settled today at $79.02 bbl, down nearly $5 barrel from the all time high and some $21 barrel short of the $100 barrel number that has almost eschatological significance for journalists, economists, and end-users.

   For the record, I do not believe that $100 barrel crude is in our immediate future. But we’ve spent plenty of time north of the century mark in recent months and years without disabling the U.S. or global economies.

   Example: Gulf Coast gasoline (ex all taxes for bulk pipeline shipment) today closed at a value of approximately $84.60 bbl, or about $5.60 bbl above crude. On May 17, 2007, the same barrel of gasoline fetched a price of $100.85 per barrel. In the Summer of 2006, we spent a few days in August with gasoline as high as $102.50 barrel and in the frantic week subsequent to Hurricane Katrina’s landfall, prices flirted with $111 barrel.

   So, we have spent numerous days above $100 barrel for gasoline, and the world did not end because of that steep price. Bulk gasoline has fetched $100 barrel or more when crude prices were in the $60’s, $70’s, and $80’s in the last year alone.  The differing gaps represent different levels of prosperity for the refining sector.

   Prediction (not to be taken out of context, please!) : We will see $100-$125 barrel bulk gasoline next Spring and/or Summer. I don’t suspect that the stiff prices will last, but it will translate into pump prices of $2.95-$3.50 gal during the peak of petronoia rallies next year (I have algorithms, equations, and fudge factors that go into this precise range. Thank God that I am not in the aluminum siding business, or the caretaker of atomic clocks).

    I have no idea where crude will be, but suspect that 2008 will be much like 2007, a year that has so far produced a $49.90 bbl low and an $83.90 bbl high. I’ve given myself a $25 barrel range to play with for the 2008 gasoline peak, and that equates to nearly 60cts gal of analytical wiggle room.

   The larger point is that we’ve seen episodes of $100 bbl-plus wholesale pricing for gasoline since 2005. Indeed, even as OPIS went to press today, the value of California wholesale gasoline (CARBOB) was at $101.43 per barrel or $2.415 gal.

    The golden state saw $100 bbl or higher quotes for gasoline on most days between March 7 and July 12, 2007.  But California has thus far survived $100 bbl gasoline, thanks partly to a small dose of conservation and the conditioning that was provided in 2005 and 2006. The state has survived the Governator, the Neverland Ranch, and drivers like Lindsay Lohan and Mel Gibson (who make the automotive exploits of the Spinks brothers appear almost responsible) and it can survive $100 barrel or higher gasoline.

   Wholesale gasoline prices actually spent some time in the Midwest earlier this year at nearly $125 bbl when refiners coughed, sputtered, and wheezed their way through late Spring with one huge refining complex actually spending much of June under water (literally, as opposed to figuratively).

   By the way, transportation diesel is worth over $100 bbl today on the West Coast and Gulf Coast diesel briefly spent time between $125 bbl and $150 bbl in October 2005 (just after Hurricane Rita hit Texas and Louisiana).

   This is not string theory. A $100 barrel price hardly represents an extreme value for gasoline or even diesel in the last 30 months. How long prices can be sustained above that number is debatable as well as a  premature question.

  Consider that ethanol’s price, when measured in dollars per barrel, briefly surpassed $240 barrel in July 2006.  Today, ethanol is worth perhaps $65-$70 barrel, depending on the bulk market.

    Gravity and a penchant for excess rule the blood flow in at least two chambers of a commodity trader’s heart.  I’ll leave it to the cynics to describe what might be in the other chambers.