Here We Go Again

At the start of 2008, gasoline prices were on their steady climb to $4.00 a gallon. Car buyers were clamoring for fuel efficient automobiles. The mad dash for 30 mpg or more was the mantra shoppers embraced. Hybrids sold like hotcakes. Toyota couldn't keep a Prius on the lot. Most people thought the era of cheap petrol was over.

It is.

Although we may witness a temporary decline in barrel prices now and again, the price of gasoline will return to the $4 gallon because oil producing nations in the Middle East, Russia, Mexico and Venezuela, to name a few, need the higher prices to fund their countries. And Washington will do nothing to boost domestic production.

You need look no further than the pump for evidence. In the last few months, crude oil prices have more than doubled — to $72 a barrel from $33.55. Gasoline prices have surged 62 percent to $2.62 a gallon from $1.62. After just a few months of relief at the pump, cheap gasoline is disappearing.

But what did people do when prices went down by January of 2009? They bought big. The mad dash became a major retreat. And the response? General Motors Corp. pulled the plug the hybrid-electric version of the Chevrolet Malibu sedan for the 2010 model year due to slow sales that led to a backlog of inventory of the vehicles on dealer lots. May 2009 sales of the Toyota Prius were off 30.2 percent from a year ago, to 10,091.

Where is the sense to it all? As a car buyer in June of 2009, do you really expect gasoline prices to remain low for the next ten years - the average age most Americans keep their automobiles before trading? If you aren't willing to educate yourself to the oil commodity market, than at least exert some old-fashioned common sense. Gas won't be cheap in the future. How could it be?

Investor's Business Daily had this to say (June 11, 2009) about current rising prices and what Washington is doing about it: "In a classic case of the doubletalk we've all become familiar with, the administration is moving in exactly the opposite direction. Its cap-and-trade plan punishes those who produce and use domestic energy. It has proposed eliminating all tax incentives to produce oil and gas, and has slapped a 13% excise tax on all energy coming from the Gulf of Mexico."

"Interior Secretary Ken Salazar has canceled 77 oil and gas leases that were assigned to Utah. He stopped plans to lease oil shale rights in five Western states estimated to hold between 1 trillion and 2 trillion (with a "t") barrels of recoverable oil. The Obama administration has decided not to issue leases for gas well drilling on the Roan Plateau in Colorado."

Ok, so not surprisingly, Washington will do the wrong thing. Where are we headed?

"I wouldn't be surprised if we're testing $80 in a week or two," said one oil analyst, while BP's chief executive, Tony Hayward, questioned whether $90 could be the "right" value.

Kuwait's oil minister, Sheikh Ahmad al-Abdullah al-Sabah, put some of the rise to signs of recovery in Asia, but warned that Opec would not raise supply at current oil prices unless "it reached $100", he said.

Alexei Miller, chairman of the Russian energy group Gazprom, raised the stakes further when he reiterated last year's estimates of $250 a barrel. "This forecast has not become reality yet, given that the [credit] crisis gained momentum and exerted a powerful impact on the global energy market. But does this mean that our forecast was unrealistic? Not at all."

So there you have it folks. While those about you continue to exercise bad decisions, you needn't. Just imagine $4 a gallon gas if you are shopping for a new car in the next few months. It won't take your imagination in the near future.