CNN Projects Gas Prices Rising to $4.25 to $5 a Gallon

January 29th, 2012 7:26 AM

When gas prices get high, politicians love to blame the financial speculators for driving the price up. On Saturday morning, CNN's Josh Levs reported that "we have analysts telling us to get ready for national average around $4.25. That's spring. Summer, that's when it could go higher, $5 could happen in some cities."

What might high gas prices mean for the 2012 campaign? Or how might the fears of high gas prices drive government policy? Will Team Obama really go easy on upsetting Iran to avoid scaring up oil prices?

CHRISTIE PAUL, anchor: Well, get ready to shell out even more at the gas pump. And please don't hurt me because I'm telling you what it says. I'm not doing it on purpose. Gas prices may spike to an all-time high. I know you're cringing. I'm cringing. Analysts say it could top $4 a gallon. That's the average. Josh Levs to talk us through. So what the heck is going on?

JOSH LEVS, CNN CONTRIBUTOR: Always the bearer of good news. We talked earlier that analysts are saying Chicago and other places could potentially see $5. It's unbelievable what we're talking about. So here's the basic idea. You know what's spiking gas prices? Think of gas prices as like a dartboard. It catches a lot of the stories.

In 2011 we had the highest average for the year ever. Let's break this down, what's happening to your money. This is what determines gas prices here. The biggest factor by far is crude oil, just how much of this dollar goes to crude ferries. Next, you have refining. That's where the oil companies make a lot of their money. And then distribution and marketing, that includes what the gas stations make. Finally, taxes. Those vary by state. That's where the dollar goes now.

What's driving prices up? You've about got a bunch of factors that come together to make that happen. Some, of it is increasing demand from many countries with growing populations and middle class, or where economy has been recovering.

Also instability in oil producing nations places like Libya, Yemen, Syria, that led to less oil production. So you've got supply and demand playing out. There are other values playing out, the value of the dollar and speculation where people are buying up oil futures. Those can affect the prices.

The government says 2012 could be even more eventful. And one big reason there is Iran. Many countries are embargoing its oil. Iran is threatening to close the Strait of Hormuz. About a fifth of the oil today worldwide goes through there. So if U.S. and other countries keep seeing economic growth, more people driving on the streets, we'll need more gas lines. I'll have more on my Facebook page. So we're talking about a perfect storm that could come together.

PAUL: Just hit us with it. I mean give us a number so we know what to expect. And I know that it's hard to do that because you're prognosticating, but what are you hearing?

LEVS: I will say some analysts are a little more hopeful that prices could actually come down, but when you look at what the national average is expected to be, we have analysts telling us to get ready for national average around $4.25. That's spring. Summer, that's when it could go higher, $5 could happen in some cities.

PAUL: I think I'm staying home this summer.

LEVS: More people might do it.

It should be said that the media have projected about 23 of the last three oil price hikes over the last few years, so add a grain of salt. But even the fear of higher prices causes a political ripple.