Yep. You heard it here first. I know everyone and their grandmother are predicting that oil prices will continue to rise into the stratosphere reaching 6-8 dollars per gallon in the not too distant future. There’s peak oil theory, increased use in other up-and-coming industrial nations, etc. I, however, think oil price increases are not sustainable. Look at what’s happening right now. At four dollars per gallon, people are finally starting to get the picture. It’s actually beginning to affect more than just their discretionary spending. Until now, most people just ended up saving a little less of their income each year to continue their energy-wasting lifestyle. Now, it’s hitting them to where they are actually thinking about many of their trips to the store or whether or not that trip to the beach is worth it. You can see it in the number of trucks and SUVs for sale in everyone’s front yard.
Obviously, the price of oil has increased costs of almost everything that we use. Most consumer products are made from oil; if not directly, then certainly in the plastic packaging that it comes in. Transporting the products from the manufacturer to the retail outlets is also going up. If the price of oil were to continue unabated, there would be a worldwide recession. No nation could continue its oil-based economy at those higher price levels. With a collapsing economy, sales of goods would plummet, unemployment would skyrocket and oil prices and its use would decrease accordingly.
It’s just not in the best long-term interests of either the oil producers or consumers to see the price of oil go up unchecked. The price is reaching the point where a real hard look is being made at alternative energy sources. Oil extraction from shale and tar sands is becoming feasible. Nuclear power and offshore drilling have proven themselves as a safe means of providing energy. Increasing their use at this point in time may not affect the price of oil in the short term. However, it will have an impact on our energy independence and long-term future. Politicians need to get off their collective butts and start thinking long-term.
I’m not saying that the price of oil will collapse to 2-3 dollars per gallon, although it’s not an impossibility either. I do think that we’ve reached a peak and prices will either stay level for some time to come or will slowly decrease below the four dollar mark.
Well, folks. There you have it. My prediction on oil prices. No credentials or advanced degree (or undergraduate degree, for that matter) in Economics to back this up. Just my take on the world. Of course, if there’s a major war with Iran, or some other catastrophic event in the Middle East, all bets are off. Stay tuned.
