You have to basically be out of your mind to believe that lower prices are a good thing during this time. The average American citizen in the last eight years has been so inundated with the cost of everything soaring that this money they’re now saving on gas now won’t be used to get put back into the economy. They’re either going to park it in their savings account, pay their bills or increase their debt. This is also further explained and concretely supported in the previous post “Americans: One Small Emergency Away From the Street“.
This oil war also means that many smaller companies that need to see oil over $80 a barrel, for example, to make a profit will go under. That means more unemployment. The only thing that will keep that from happening, and yes it is a given, is the buying out of these smaller oil firms by larger ones who can survive (but not forever) these low prices. Think ahead while you enjoy these low prices now, because they will skyrocket — along with the price of every other essential good.
Also, expect to see in typical fashion the simple minded will blaming ‘big oil’, their favorite after ‘evil banker’, and not see the bigger picture: There’s a war between Russia and the West that’s causing all of this. What is causing the war between Russian in the West is also another story all together. You can find that explanation in such readings as New Lies for Old, The Perestroika Deception, Red Cocaine or articles from expert analyst JR Nyquist.
What we’re watching now is tantamount to seeing beach goers watching the water recede half a mile and then proceed to walk further inward where the water once was thinking it’s fun as they collect shells, play and run around on the ocean floor. Yet what they don’t know is that is a precursor for a tidal wave only moments away and they will be caught up in it.
Enjoy your prices now, but be smart and use this to plan ahead in any way that is beneficial for you — i.e. storing gasoline for when the prices predictably go sky-high. A $250 investment at this moment might save you $750 in five months from now.
John Hofmeister attracted national attention in 2010 when he predicted that average U.S. gasoline prices would soar to $5 a gallon in 2012, thanks to rising crude oil prices. His forecast fell short, as the cost of filling up flirted with $4 in 2012, but never went higher.
Now, with gasoline prices at $2.14, their lowest level since May 2009, the former president of Shell Oil is issuing another warning, telling motorists that their joy ride may end sooner than they think.
“The next round of high prices is likely to start later this year, as crude rebounds to the $80s and $90s, perhaps pushing to the $100 level by late in the year or early next,” Hofmeister told me the other day after a trip to Calgary, where he was promoting natural gas as a transportation fuel.
“The triggering mechanism will be global demand growth relative to how much capital constraint gets baked into future plans for production this year and next. If new production capital is deferred and demand growth continues at 2% or more, we’ll see capacity constraints during 2016, an election year of course, drive prices higher. Whether we reach $4 a gallon or push past, it’s too early to tell.”
Moreover, Hofmeister still sees $5 gas on the horizon.
“Most of us in the industry are surprised that it’s fallen as hard and fast as it has,” Ryan Lance, CEO of ConocoPhillips, said at a Center for Strategic and International Studies. “I don’t know that I have a real good answer to that question, other than it doesn’t feel like the fundamentals would support that kind of fall.”
In the meantime, though, his advice to motorists regarding gasoline is simple: “Enjoy the price, because it’s going to go back up.”
Full article: Former oil exec: $5-a-gallon gas on the way (USA Today)