Rising Oil Prices Fuels Debate Over Offshore Drilling

Prices are reduced two-cents on the gallon at a Chevron gas station in Los Angeles on Tuesday, Nov. 23, 2010. (AP)

As oil prices rose above $88 a barrel Friday, a new high for this year, energy analysts predicted that oil could rise to $120 a barrel before the end of 2012, adding more fuel to the debate over offshore drilling.

It's hard to say exactly what that would mean for motorists buying gasoline since the price of gas depends upon a number of different variables, including the region, retail prices and local and state taxes, AAA told FoxNews.com.

But the current national average price of gas is $2.90 as of Thursday, according to AAA's website. And in July 2008, when oil prices was above $145 a barrel, the national average price of gas was $4.11.

The rise in oil comes on the same week that the Obama administration announced it will not allow offshore drilling in the eastern Gulf of Mexico or off the Atlantic coast for at least seven more years because of the Deepwater Horizon oil rig explosion in April that killed 11 workers and unleashed about 5 million barrels of oil into the Gulf.

That decision was cheered by environmental interests and Democratic lawmakers along both coasts but slammed by Republicans and the oil and gas industry who say the move will kill jobs and make America even more dependent on foreign oil.

Energy analysts though did not blame the announcement for the surge in oil prices. Instead, they pointed to consumption growth in developing nations.

Bloomberg first reported JP Morgan Chase & Co.'s $120 forecast, which said the Organization of Petroleum Exporting Countries, OPEC, is unlikely to increase production in the first half of next year unless prices surge through $100 a barrel. OPEC provides about 40 percent of global supplies.

Kevin Book, managing director of Clearview Energy Partners, told FoxNews.com that his firm sees oil rising to $107 a barrel in 2013 "if economic growth follows its current trajectory."

Book explained that his firm's forecast implies that there is substantial non-OPEC slow downs at the same time as there is significant demand growing in emerging economies in Asia and other places.

"What it does is draw inventory down and lowers capacity in the system," he said. "It also pulls more OPEC oil into circulation."

The Obama administration's announcement reversed it's decision to hunt for oil and gas that the president himself announced three weeks before the largest offshore oil spill in U.S. history. The oil and gas industry and many Republicans say the Obama administration is stifling domestic oil production and contradicting the will of recession-weary voters eager for new jobs.

But Book says that announcement was not a surprise and had no effect on the rise of oil. While the U.S. has an abundant supply of its own oil, environmental concerns go hand in hand with domestic production, he said.

"We're going to use OPEC's oil," he said. "The problem isn't doing business with OPEC. The problem is doing business in a world where OPEC is becoming less relevant."

"The true value of OPEC from a price stability standing to its members is predicated on the idea it has to do what it has to do or Saudi Arabia will flood the market with cheap oil," he said.