5 things to watch in energy
From Iran to refineries to record earnings, here's what's moving the market over the next few weeks.
By Steve Hargreaves, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) - With oil and gasoline prices near record highs, every word from leaders of oil-rich nations and every government energy report can push prices further into the stratosphere or provide some relief to wary consumers.

Here are five things to watch in the coming weeks, and they don't look good for those feeling pinched at the pump.


The standoff between Iran and the West over that country's nuclear program has fueled rising geopolitical tensions - and helped drive oil to record highs above $75 last week.

Nauman Barakat, an energy trader at the investment bank Macquarie, said Friday, April 28, was a day when crude prices could spike, since that's the deadline for Iran to comply with a United Nations Security Council resolution calling on the country to stop enriching uranium.

"Clearly, Iran will say no," said Barakat. "You can make a case for crude going to $80 a barrel."

Iran, the worlds fourth-largest oil exporter, has threatened an oil embargo if the Security Council imposes sanctions on the country over its nuclear program, which Iran says is for peaceful power generation but which many countries suspect is intended to produce a weapon.

Tensions could escalate further. President Bush has refused to rule out a pre-emptive nuclear strike on the country and talk has swirled about Iran's ability to blow up oil tankers passing through the Persian Gulf.


Venezuela is most often in the news with plans to nationalize oil industries, a move many say discourages international investment in that country's infrastructure, hurting production.

A news report Monday said that Venezuela's left-leaning president, Hugo Chavez, is making plans to sharply raise taxes and royalties on foreign oil operations in the country.

Analysts fully expect the trend toward nationalization to continue for the foreseeable future and say its happening in not just Venezuela but across most of South America and in Russia as well.

And you can add another country to the list: Mexico.

"The front runner in the Mexican election is a left-wing socialist," said Dan Lippe, an energy industry consultant. "Most of the things people are nervous about will still be with us a year from now. We aren't looking for crude prices to come down until maybe 2008."

Mexico, with presidential elections set for July, is the world's seventh largest oil producer.

The ethanol switch

One thing that should be only a short-term problem and could have a happy ending for consumers is the switch to an ethanol-based additive in gasoline.

Concerns about there not being enough supply of ethanol and the logistical kinks that must be worked out as the switch is made have helped drive gas prices to near record levels over the last few weeks. Gasoline hit an average of $2.91 across the country Monday, according to AAA, and prices are above $3 on average in California, Hawaii, New York and Washington DC last week.

But Lippe said any problems or spot shortages caused by the switch should be worked out by midsummer, and gas prices should cool off.

Oil profits

While high oil and gas prices aren't usually good for consumers, they are very good for oil companies and those who invest in them.

Later this week the big three American oil companies are due to post earnings. No one expects them to be meager.

Last year Exxon Mobil (Research) recorded the fattest profits on record for an American corporation. The company said it made $10.7 billion just in the fourth quarter, while for all of 2005 it earned $36.1 billion, or about $1,146 a second.

Analyst expect quarterly profits to soar when it reports earnings Thursday.

Other oil companies reporting this week include ConocoPhillips (Research), due Wednesday and Chevron (Research) due early Friday.

Windfall profit taxes

With reports of record profits come calls for profit taxes and other attempts by lawmakers to tame prices.

Last week Sen. Charles Schumer (D-N.Y.) called for an investigation to see wether oil companies were deliberately withholding gas supplies in an attempt to bid up prices.

And Sunday the idea of a so-called "windfall profits tax," long championed by some Democrats but rarely mentioned by Republicans, got some traction from Sen. Arlen Specter (R-Penn.), who said on CNN that it was "something worth considering among other options."

But observers say the sabre-rattling by lawmakers is nothing more than political posturing in an election year.

"Price gouging, windfall profits, OPEC-bashing, that isn't going to change the price of fuel," said Bill Wicker, a Democratic staffer on the Senate Energy Committee. "That just makes people feel better."

(An earlier version of this story misstated the timing of Mexico's upcoming elections. CNNMoney regrets the error.)


Rising oil, long-term rates could spoil the party. Get the full story here.

Gates buys into ethanol. Click here for more.

Venezuela's Chavez said to mull oil move. More hereTop of page

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