$4.00 gas might feel cheap this summer
A great person once said that to live in interesting times is to live in the best of times. We certainly live in interesting times.
Just a few weeks ago many oil experts claimed the current oil spike could last for a few months, but would probably be short-lived overall barring some major uprising in Saudi Arabia, such as the ‘day of rage' that fizzled into nothing just a little more than a week ago. Nevertheless, long term, many of these experts predicted that prices would eventually increase, but perhaps not for a few years.
Now many of these same experts worry $4.00 gas might not be just a spike.
Not only are tensions still brewing in the Middle East and North Africa, but the US is now helping to bomb strategic locations in Libya, while also helping to enforce a no fly zone – something oil traders worry could keep oil prices above $100 per barrel indefinitely. Even Saudi Arabian rage is percolating anew, as problems in Yemen, Bahrain, Syria and Iran escalate.
Then there is Japan. With less nuclear capabilities thanks to the earthquake and tsunami, Japan will have to increase their imports of coal, LNG and oil. Likewise, it will take more oil to rebuild Japan. As a result, oil demand is set to increase more than forecast just a few months ago, as supplies not only decline but face great uncertainty.
Moreover, some believe the nuclear renaissance is now dead, meaning more alternative forms of energy – particularly oil, gas and coal in the short term – will be ever more needed.
None of this bodes well for gasoline prices.
Today, my local gas station is at $4.05 for regular. Nationwide, the average is almost $3.60, yet the more expensive summer blends are still coming and will push prices even higher. Couple that with the growing volatility and uncertainty in the energy markets and $4.05 will probably look cheap this summer.
How is $4.00+ gas going to affect your driving and commuting habits? Your next car purchase? If you believe the oil experts, you'd better start taking those questions seriously. Unlike the 2008 gasoline spike, these prices might stick around.