Gas Around $1 A Gallon Soon?
I probably shouldn’t be telling you this but we may be seeing gas prices around one dollar a gallon. This might even happen within the year. But before these tidings of great news can come to pass, we might have to endure paying almost five dollars a gallon at the pumps first.
How can I say this? Well, it certainly wasn’t an oil slick birdie who told me about this. I got tired of minimalist news reports saying, “Oil prices increased today” and then going on about how petting baby seals was bad for the enviroment. What happened to journalistic standards of filling in details, such as, “how much did prices go up” and, that all important, “why did they go up”? So I did my own investigation.
At first I thought it was those greedy people in China and India gobbling up all the oil while our poor, starving cars stranded themselves on the sides of roads. But it turns out that there is more than enough oil to meet the world’s demand. If this were a simple matter of supply and demand, we would be looking at about $80 a barrel; and could only blame India and China for the rise from the good ol’ days of $30 a barrel.
No, there is another culprit in these ongoing price increases: speculative investors of pension funds, sovereign wealth accounts, and banks across the world. OIl futures, it turns out, are a very safe investment, or so it seems. Well, much safer than, say, investing in a paper towel business and revolving door company. With those, you could be wiped out before you could turn around. In any case, their oil investments weren’t much of an influence back in 2000 when it was about $9 billion. 8 to 9 billion dollars is what we spend on oil each day now, globally. However, now those same investments are at $250 billion — several weeks worth of oil spending — and growing! And why not? If you have $3,000, you can go to the New York Mercantile Exchange (NYMEX) and control almost $70,000 worth of oil.
So it’s all that ol’ speculative “make money quickly” bubble that is pumping up the prices. According to some economists, this bubble could take prices as high as $150 a barrel. That’s the bad news for us. The good news is that, while we might not be able to predicted how high and how soon, we do know how other speculative bubbles behave. Remember the speculation in housing, metals, and stock markets? They all tended to burst. And the quicker they went up, the harder they crashed. Some economists are brave enough to say that, within the year, we could see an oil splat of $30 a barrel. We’ll see … A lot can happen before all this leaves us in an oily residue. For now oil companies will keep making record profits and our government will continue taking half of that for itself. As for you and I, we”ll just sit tight and see whether we end up walking more as we go shopping for dog food because the pension firm lost our retirement money.
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Interesting theory, but I disagree on the $1 a gallon — maybe 2, but I think the days of 1 dollar a gallon is gone.
I read the other day that OPEC said it would be 70 or 80 dollars a barrel if it wasn’t for global tensions and speculators. Regardless of speculators or not oil isn’t going to go down much(if any), it will continue to trend up in the long run I believe.
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