Saturday, December 06, 2008

I Call Bottom!

It's official--there are some people suggesting that gas prices might go as low as one buck per gallon. Now, I'm not disagreeing that it could happen, but if I were a betting man, I'd bet that prices are more likely to hit $3/gallon before they hit $1/gallon. But with all my google sleuthing, I could find no recent news articles predicting that gasoline could hit $3/gallon, or even $2/gallon for that matter.

I'll tell you why--it's the same reason people were predicting oil prices would hit $200/barrel earlier this year--most people have a very short term view of the world. Gas prices have been going up for a week, then they will "obviously" continue to go up, and if gas prices have been going down for a week, then they will "obviously" continue to go down. Take the last two data points, draw a straight line from the first one to the second one, then continue that line out perfectly straight, and that's where gas prices will land next week.

But global events and decisions are already setting the base in place for another oil spike. Demand will continue to increase, but projects are being canceled. Investments in the Canadian oil fields that were supposed to usher in a source of dependable, albeit more expensive oil, are being put on hold or canceled outright. Investments in alternative energy which had been profitable with oil at $100/barrel, or even $80/barrel, are now losing money and additional investments are being scaled back or canceled. And now, apparently, our brief spike with high oil prices is fading in the distant memory--SUV's are back!

Let's do the math. Increased energy consumption + decreased energy investments = high oil prices. Just something to look forward to next year. I wouldn't dare predict when oil prices will spike again, but the fact that it will is about as certain as the sun rising tomorrow.

And since I'm already talking about oil prices, I'd like to say that car commercials that brag about their cars getting 25 mpg (more-or-less, depending on the car being promoted) are stupid. My 1990 Ford Taurus could do better than that--and that car was nearly 20 years old! To say that I'm underwhelmed is a major understatement. It's no wonder Detroit is doing so badly. The cars today get worse mileage than they did 20 years ago! I'm not sure that's something I'd want to brag about.....

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