Expert Thinks Gas Prices Will Start To Drop

A local economist said the end of the rapid rise in gas prices is here.

Consumers have heard predictions of $4 and even $5 a gallon of gas, but Chris Keuhl, an economist who specializes in transportation issues, said the oil bubble is ending.

Keuhl said that oil companies and oil-producing nations shouldn't be blamed for high gas prices.

"The countries that are producing don't set the prices. The oil companies don't set the prices. It's the traders that set the prices," said Keuhl with Armada Corporate Intelligence.

Keuhl claims that speculators wounded in the credit crunch went looking for new ground.

"They flooded into commodities -- steel, gold, oil, pork bellies, you name it," Keuhl told KMBC's Micheal Mahoney.

And despite the fact that oil production is up and gasoline consumption is down, speculation by giant investor groups have pushed up the price for a barrel of oil beyond where it should be.

Some financial experts think the credit crisis is starting to ease and the U.S. dollar is settling down, so speculators will move on to something beside the price of oil.

"I think it will come down very quickly. There's $40 to $50 in the price per barrel that's driven by the investors," Keuhl said.

On Thursday, Steve Forbes told French reporters that "There's hardly a hedge fund in North America that hasn't speculated on oil futures."

Both Forbes and Keuhl believe that when the bubble bursts, gasoline prices will drop to just more than $2 a gallon.

"Pretty close -- $2.25 to $2.30 on a national level," Keuhl said.

Keuhl said he thinks oil prices have peaked and will start to drop. However, if drivers flood the highways again, prices will stay up.

There are other economists who don't see it this way. But almost everyone agrees that speculators impact oil prices.

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