Profiting On Energy

U.S. gasoline prices hit a record high this week, breaking a previous high from the early 1980s, on an inflation-adjusted basis.

The latest increase came as Americans mobilized for the Memorial Day holiday weekend, also considered the start of the peak driving season.

In most states, the price of a gallon of gasoline is solidly above $3.00; in others, it is approaching $4.00 a gallon.  Prices are up more than a dollar a gallon since February and are about a third of a dollar more than a year ago.

The last time prices were over $3-a-gallon on a national basis was in the wake of hurricanes Katrina and Rita in September 2005. At that time, crude oil hit a record high of about $72 a barrel. Earlier in the week, crude oil traded around $67 a barrel, having slipped below $50 a barrel late last fall.

The latest weekly Energy Department data on energy supplies showed crude stocks increased by two million barrels and gasoline inventories grew by 1.5 million barrels, versus forecasts of a 0.6 million barrel build for crude and a 1.4 million barrel increase for gasoline

The Energy Information Administration this week released a worrisome international energy outlook, forecasting a 57% iincrease in world energy consumption by 2030 -- assuming modest economic growth rates and a continuation of current government policies.

Economic Impact

The spike in energy prices -- particularly gasoline -- has raised concerns that the U.S. economy will slow even more than it has in recent months and possibly sink into recession, as it has during past energy shocks.  (The government reports revised first-quarter GDP data on May 31; economists expect growth of 0.7%, versus the original reading of 1.3%. Both are the weakest in years.)

Retailers have cited high gasoline prices as a reason for weak sales, but analysts say merchants often use that as a default explanation, even as an excuse for poor performance. Restaurants typically also feel the pinch.

Thus far, there is little indication -- given current consumption -- that high gasoline prices are influencing driving habits and/or spending patterns of anyone other than members of the lowest income groups, who have little discretionary spending. Income gains and a strong job market are helping to buoy consumer spending.

In addition, economists say consumers see the price levels as temporary -- hobbled refineries have meant less supply -- and are looking beyond the problem. They are also using credit cards more often to pay for gas -- which could be seen as a form of borrow now, pay later thinking.  Indeed, capacity at the nation's refineries is currently at 91.1%, versus a summer average of 93%-95%. But it's expected to climb as more plants correct output problems.

It may be a summer of discontent for motorists and vacationers alike -- the latter might be forced to pay airline fuel surcharges on top of high fares -- but a lot depends on how the annual hurricane season plays out in the oil-rich Gulf of Mexico.

More importantly, no matter what happens, there's profits to me made.

Here's a sampling of our coverage going into the summer season when energy consumption is high.

Hurricane Outlook

The National Oceanic & Atmospheric Administration (NOAA) is warning that the U.S. could see up to five major hurricanes this year. A similar prediction for 2006 fortunately failed to come to fruition after a devastating 2005, when New Orleans was swamped and gulf oil and gas facilities were severely damaged. Scott Cohn has the story.

Price Gouging Complaints

Nearly half the country's governors -- Republican & Democrat alike -- call on Congress to investigate allegations of price gouging by the oil companies, with Charlie Crist, Florida governor and CNBC's Erin Burnett.

Refinery Problems

Bottlenecks at refineries are getting part of the blame for high gas prices, as demand outstrips supply, but things may be turning around. Phil LeBeau, CNBC automotive reporter; Jeff Dietert, Simmons & Co. International director of integrated & refining research; and CNBC's Liz Claman discuss the issue.

Investing In Energy

How to pump up your portfolio from higher crude oil and gas prices, with Robert Shiller, Yale School of Management economics professor; Joseph Keating, First American Asset Management chief investment officer; Herb Greenberg, MarketWatch senior columnist; Noah Blackstein, Dynamic Mutual Funds portfolio manager; CNBC's Bob Pisani & Larry Kudlow.

Riding The Railroad Rally

The railroad sector is on a roll this year. Craig Hodges, portfolio manager of the Hodges Fund, shares his views and picks with Dylan Ratigan.

Solar Sector Rising

Solar companies are attracting renewed interest, and that's reflected in their share prices. Improved technology has made fuel cells more powerful and efficient. First Solar and Trina Solar, whose sales tripled in the most recent quarter, are two players whose stocks have benefited. The sector is also breeding IPOs. Bob O' Brien reports.

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