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Crude to Drop, but Not Gas Prices: Tom Petrie

Crude prices will continue to drop, but gas prices won’t because of tight refinery capacity, Strategic Energy Advisors Chairman Tom Petrie said Friday on CNBC.

“We’re on a knife edge, but seasonally we’re coming out of the driving season, so it shouldn’t last too long,” he said on “Fast Money.”

California has been hit by soaring gas prices in recent days, a situation Petrie said would last another two to four weeks.

(Read More: Gasoline Prices Set to Rise Through Election Day)

Petrie also pointed out a couple of factors that could affect crude oil prices: Possible regime change in Iran and elections in Venezuela.

“On the crude side, we’re amply supplied. It probably gets bigger next year,” he said. “We’ve had a big insecurity premium in the price of oil for most of the year, $15 to $20. That gets eroded in the next three to six months.”

Prices, he said, could drop to $70 per barrel. “I think we test into the 80s, low 80s and into the 70s before it’s over.”

Drakon Capital’s Guy Adami said he didn’t think gasoline prices would fall, making such companies as Valero, Tesoro and Phillips 66 attractive.

“Crude’s not the problem. We have enough crude out there,” he said. “It’s refiner capacity, which is why I think still these refiners are trades and why I still think gasoline continues to go higher, unfortunately.”

OptionMonster.com’s Jon Najarian also liked Phillips 66; “They are hitting on all cylinders.”

Speculation in the options market has led to increased out-of-the-money call buying in names such as Williams and Murphy Oil .

“I really think Marathon Petroleum is another name you can keep an eye on,” said OptionMonster.com’s Pete Najarian.

Petrie also added that he expected an increase in mergers and acquisitions within the sector.

“Consolidation is coming, more in the upstream than in the integrated side. There’s not enough to consolidate there anymore,” he said, adding that abundant capital and pent-up demand would drive it.

“We’ve seen very little corporate consolidation over the past 6 years,” he added. “It’s going to pick up.”

Trader disclosure: On Oct. 5, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s “Fast Money” were owned by the “Fast Money” traders: Brian Kelly is long QQQ; Brian Kelly is long GLD; Brian Kelly is long SLV; Brian Kelly is long DAX; Brian Kelly is long DBA; Brian Kelly is long DBB; Pete Najarian is long AAPL; Pete Najarian is long C; Pete Najarian is long JPM CALLS; Pete Najarian is long INTC CALLS; Pete Najarian is long SBUX; Pete Najarian is long FB; Pete Najarian is long MSFT; Jon Najarian is long GS; Jon Najarian is long JPM; Jon Najarian is long FB; Jon Najarian is long AMZN; Jon Najarian is long HPQ; Jon Najarian is long V; Jon Najarian is long VLO; Jon Najarian is long CVX; Jon Najarian is long YUM; Jon Najarian is long PSX; Jon Najarian is long GLUU; Jon Najarian is long CME; Jon Najarian is long CBOE; Jon Najarian is long STSI; Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU.

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