RE: Gas to hit 4 dollars per gallon by the end of the year
Since I am involved in this as part of my job, let me add my two cents. Here in Houston, the future price of crude is the most important statistic imaginable. Thousands of people are employed in projecting this. One of the top outfits, Goldman Sachs, has made a startling projection, but one must also add that there is wide disagreement with the projection among other firms that do the same - but there is widespread agreement that oil is going up, way up.
Sachs is projecting oil at $105 a barrel by the end of the year. It is their prediction that is the source of the stories you are hearing. But keep these facts in mind: If one looks at the historic price of oil in "real" dollars valued from say, 1972, oil is currently cheap, even at $60 a barrel. The point where this changes is around $75 a barrel, a point after which in real dollar terms, oil begins to cut all the way to the economic bone. There are many who think it would be good for the US to advance to the $75 level, since we currently have a government that believes in total inaction in regards to doing anything to curb oil consumption, which has led to incredible energy waste in the US, and the only solution will be the cruelty of the marketplace. I wholeheartedly agree. The question is, after $75 a barrel, will the dampening of the economy cause demand to drop enough so that prices stabilize at this point. Sachs says that three new wildcards have been added to the equation - China, India and Japan - countries which have extremely activists governments in the areas of oil policy, exactly the opposite of us in many ways. Over the past three years these economies have foreseen the inevitibility of a huge rise in the cost of oil, and have implemented tax programs and government directives aimed not just at lowering the amount of energy needed, but at producing the same economic output from less energy input by modernizing factories and discourging private transportation in favor of mass transportation. In the US, it is transportation where the most enormous waste of energy occcurs. Instead of building our cities upward, we let them sprawl outward, so the automobile becomes the only sensible means of transportation. In addition, the average automobile in use is a gas sucking pig. In other words, the thing we are trying to produce, in this case the delivery of our ass to the workplace, requires an enormous amount of energy. In China and Japan, where bicycles and trains are the norm, one gallon of diesel fuel or an extra bowl of Wheaties delivers scores of asses to work, versus the fractional amount of buttock delivered in the US. The sad part about all of this is that if a sensible policy of discouragement of wasteful energy consumption, a staple of every European and Asian government, had been the norm in the US, we would spare ourselves a lot of pain.
Instead this is all about to come as quite a shock to people, a devasting shock if Goldman Sachs is correct, because $105 barrel oil is something these other economies can tolerate, while ours will absolutely tank, and tank big time. If you are an investor, the place to put your money is in stocks that are part of the hybrid engine automobile equation - we are about to see a national trip to the junkyard where about 50 million SUVs are about to become scrap, just like we saw with the great gashogs of the sixties when the oil shocks of the seventies hit. We are about to see a massive shift in the US automobile fleet, from stupid gashogs to hybrid engines. Lithium batteries, energy transfer assemblies, all this type of technology is about to get really hot.
My personal opinion, based on the models I've seen, isa that oil is going to $75 a barrel, and it will top out at that point. This puts gas around $3.25 a gallon, a point where most of the lower to lower middle income folks will have to junk their old Suburbans and Dodges, and where new car buyers will be buying hybrid engine automobiles without thinking twice about it, while industry switches to the currently more expensive "clean coal" technologies. This should put a damper on prices. But Sachs says the catch-up time necessary, during which this switch is made, will force oil to shocking levels. Better hope they are not right.
Recall that earlier generations faced down fascism and communism not just with missiles and tanks, but with sturdy alliances and enduring convictions. They understood that our power alone cannot protect us, nor does it entitle us to do as we please. Instead, they knew that our power grows through its prudent use; our security emanates from the justness of our cause, the force of our example, the tempering qualities of humility and restraint.
-President Barack Obama, 1st Inaugural address