NEW YORK ( DailyFinance) -- Most U.S. motorists know what's probably coming this summer to a gas station near them: scorchingly high gas prices. Intensifying civil war in Libya has already cut that nation's oil exports to about 25% of capacity, pushing crude prices above $105 per barrel -- triggering a quick 40-cent increase in the average U.S. price for regular unleaded to $3.50 per gallon. However, that price may look low for the rest of 2011, for two reasons: 1) the risk premium that institutional investors are paying on oil futures because of concern that the unrest could spread to Saudi Arabia or Iran; 2) the U.S. summer driving season, during which gasoline demand rises, enabling both oil companies and local gas stations to raise prices without risking a decline in customer traffic.
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- ConocoPhillips (COP). Recent price: $78. P/E 11.4. An integrated oil giant, COP looks cheap based on Thomson Reuters First Call fiscal 2011-2012 forecast earnings per share of $6.78 to $7.84, which are likely to be revised higher due to substantially higher oil and gasoline prices. Assuming an $89 share price by the end of 2011, you'll need to buy about 50 shares to offset a $1 gas price increase.
- Chevron (CVX). Recent price: $103.51. P/E 9.5. It seems unlikely that a stock over $100 could be undervalued, but Chevron is, based on Thomson Reuters First Call fiscal 2011-2012 forecast earnings per share of $10.67 to $11.64. Chevron will likely trade at or near $115 by the end of 2011, and again 50 shares should ease the pain at the pump.
- Valero Energy (VLO). Recent price: $27.30. P/E 9.4. Valero, the largest oil refiner in North America, has made it through the gasoline market's recession in decent shape, and it's likely to benefit from larger refining margins in 2011. The bulk of Valero's operation involves refining the more profitable heavy/sour crude oil, and margins will likely rise in 2011 as U.S. gasoline demand continues to recover. That should push Valero to about $35 a share by the end of 2011. A 75-share purchase would likely offset a $1 rise in gasoline prices.
- Core Laboratories (CLB). Recent price: $101.90. P/E 27.7. Core Labs is a leading reservoir optimizer, providing an impressive array of proprietary products and services for the energy sector. And in an oil-hungry world, Core's products and services are likely to continue being in demand. What's more, as oil fields age and conventional fields become harder to find, oil firms will look to CLB to extract more out of existing fields. Thomson Reuters First Call fiscal 2011-2012 forecast earnings per share for CLB of $3.65 to $4.46 looks low. A 50-share purchase would likely offset a $1 rise in gasoline prices.
- Suncor Energy (SU). Recent price: $45.30 per share. P/E 17.4. Oil priced above $90 per barrel means there's unlikely to be an interruption of Suncor's high-cost oil sands operations, and a double-digit production increase is likely in 2011. Suncor should approach $60 a share by the end of 2011. So, a 75-share purchase would likely compensate for a $1 increase in gasoline prices.