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Higher crude, global demand could drive gas prices higher

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Last week Breakout spoke with GasBuddy.com’s Patrick DeHaan about summer gas prices.

The national average [currently at about $3.65 a gallon] may hold steady for the next week or two before we start to see that dive take place. And we’re hoping that by mid summer the national average could be as low as the $3.40’s.

He pointed to a smooth winter and spring maintenance season while cautioning that a large hurricane that shuts down production could send prices higher.

Jeff Kleintop of LPL Financial sees another reason you may actually be paying more at the pump this summer: crude prices. While noting that Memorial Day pump prices this year were in line with 2013 and 2013, Kleintop notes that, “oil prices are much higher this time around - 104 vs roughly 90-95 at the start of each of the last two summers and I think it’s gonna stay there pulling gas prices maybe a bit higher.”

Another catalyst for higher gas prices could be increased global demand. “The emerging markets are now making up more global demand than the developed markets as of this year and their growth remains very powerful,” Kleintop notes.

To be fair, the price of crude and the price of gas don’t always move hand in hand, but LPL’s chief market strategist says that’s not the case this time around:

I think there’s more of a direct link than there has been in the past. A year ago we had huge inventories in Cushing, Oklahoma just waiting to be refined and shipped around the U.S. Now that’s been diverted through the southern portion of the Keystone XL pipeline to the Gulf Coast for refining and export - it’s going overseas.

So with production levels remaining high, how can one get in on the action and make some money to pay for those higher gas prices?

“Transports have been doing very well,” Kleintop says, specifically predicting the rails as a way to play higher crude oil prices. “This is a trade that may be with us for some time as a real beneficiary of this huge energy resurgence in the U.S. and the demand, not just here, but around the world."

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