Hurricane Predictions

Hurricane Predictions: Six-Dollar Gasoline
by Kevin Kerr
The Rude Awakening
Wall Street, New York
Tuesday, April 11, 2006

Kevin Kerr goes through this year's Hurricane Predictions and speculates on what more hurricanes could mean for the US gasoline supply.

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Joel Bowman, relishing the soothing tranquility of Upstate
New York, reports...

For the last two years, Kevin Kerr has been issuing a
number of audacious predictions. Call it prescience or call
it luck, Kevin's predictions have been coming to bear...

Remember complaining about the cost of filling up your gas
tank back when crude was trading at $38 a barrel? Although
this relatively miniscule pricing seems like a distant
memory, it was only last year! It was during this time of
inexpensive road trips when Kevin broke from the pack and
announced his prediction that we would see our economy's
fuel reach $60 a barrel.

Cynics dismissed his claims...readers deposited their
checks.

Last year when gold was languishing in the sub $450 depths,
Kerr noted that, as the dollar would continue to weaken,
the shiny metal would soar to over $550.

Skeptics scoffed...followers profited.

So when it came time to check in on where oil prices are
likely headed this year, we new who to ask. Read on below
for Kevin's take on a market about to undergo another
period of tumult...just don't expect a rosy outlook.

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Six-Dollar Gasoline
By Kevin Kerr

Hurricanes, Terrorism, Hugo Chavez or Murphy's Law. One way
or another gasoline prices are heading much higher this
summer. Six dollars a gallon is not out of the question in
some parts of the U.S. So it might be a good time to buy
call options on gasoline or to sell your Escalade...or
both.

Last year's hurricane season was the most destructive one
in recorded history, with 27 named storms and 14
hurricanes. These powerful and relentless storms, including
the infamous Katrina, knocked out a huge portion of the
nation's hydrocarbon production and refining
infrastructure. Many natural gas platforms in the Gulf
remain shut-in.

Forecasters expect another busy Atlantic hurricane season
this year, with 17 named storms but not as many intense
storms striking land as last year.

This year's hurricane season, which runs from June 1 to
Nov. 30, is likely to have nine hurricanes, five of them
intense, according to William Gray, a hurricane researcher
at Colorado State University.

"Even though we expect to see the current active period of
Atlantic major hurricane activity to continue for another
15-20 years," says Gray, "it is unlikely the seasons that
follow will have the number of major hurricane U.S.
landfall events as we have seen in 2004-2005."

Hurricane Predictions: Any Disruption Is Bad

Even so, Gray's team places an 81 percent chance on the
probability that at least one major hurricane will make
landfall along the U.S. coastline in 2006, and a 47 percent
probability a major hurricane will hit the Gulf Coast
between the Florida Panhandle and Brownsville, Texas.

I don't trust these hurricane predictions very much, but
ANY disruption to gasoline production could cause prices to
soar. Hurricanes are just one of the many threats to our
nation's supply of gasoline. Terrorism and Venezuela pose
an ever-present threat to the supply of imported gasoline.

Venezuelan president, Hugo Chavez, is becoming increasingly
hostile to both foreign oil companies and to the United
States. Chavez recently reneged on long-standing profit-
sharing agreements with several major oil companies. And he
has become increasingly fond of spewing anti-American
rhetoric. As such, a supply disruption from this
unpredictable Latin American gasoline exporter seems
increasingly likely.

Hurricane Predictions: An Unleaded Rally

Gasoline supplies are already tight, which is why I expect
to see unleaded rally hard this week, especially if
Wednesday's EIA inventory numbers show large drawdowns.  I
was on the CNBC show, Kudlow and Company, last Friday and
the CEO of Yellow Roadway was also on the show. He shocked
me by saying he is not concerned about energy
prices....WHAT? If he isn't he should be. Waste Management,
the big garbage-hauling company, has one of the biggest
fleets of trucks in the world. Because of soaring fuel
costs, Waste Management just reported its first quarterly
loss ever.  
 
So how can the CEO of a major trucking company say he's not
concerned about energy prices? It's so frightening to
listen to some of these people who are just so deep in
denial about where the commodities are going. I weep for
their complacency.    

 
 
If gasoline demand ramps up this summer and we get hit with
even one major hurricane in the Gulf coast, we are going to
see at least $3.50 for regular unleaded gasoline, and in
some states, maybe $4.50. And that's before any potential
problems out of Venezuela, Iran, Iraq, Nigeria or
elsewhere.

Gasoline is already $3.04 for premium right down the street
from my house. Do individuals really believe that if we
have a devastating hurricane in the Gulf, or if Hugo Chavez
suddenly pulls the easy gasoline off the market and sends
it to China, that gas will only go up another 40 cents. In
the financial markets, denial is a very expensive character
trait.

Sell the Escalade...buy call options on gasoline.

[Joel's Note: As you read this column, Kevin's readers are
sitting pretty on their silver plays to the tune of some
400%. Look, there is not a whole lot you can do when the
gas station attendant hands you the bill...aside from
cringe of course. When your dollar simply doesn't buy what
it used to, there is no use complaining to the cashier at
the grocery store. Instead of suffering in the current
economy, why not profit from it? Find out how Kevin's
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And the Markets...

	Monday	Friday	Week-to-Date	Year-to-Date
DOW	11,141	11,120	0.2%	3.95%
S&P	1,297	1,295	0.1%	3.87%
NASDAQ	2,333	2,339	-0.2%	5.80%
10-year Treasury	4.96%	4.96%
30-year Treasury	5.03%	5.04%
Russell 2000	753	756	-0.4%	11.84%
Gold	$598.88	$589.25	1.6%	15.84%
Silver	$12.67	$12.08	4.8%	43.68%
CRB	339.99	337.18	0.8%	2.46%
WTI NYMEX CRUDE	$68.87	$67.41	2.2%	12.83%
Yen (USD/YEN)	JPY 118.38	JPY 118.29	0.1%	-0.39%
Dollar (EUR/USD)	$1.2108	$1.2099	0.1%	-2.28%
Dollar (GBP/USD)	$1.7421	$1.7439	-0.1%	-1.24%
Dollar (AUD/USD)	$0.7293	$0.7262	0.4%	0.48%
Franc (USD/CHF)	$1.3027	$1.3017	0.1%	0.56%
Dollar (USD/CND)	$1.1494	$1.1484	0.1%	0.92%