So a friend emailed today and says:

Gas $10/gallon? At least one analyst sees that in the next two years.

My Response?

Then that analyst is worthless & needs to be fired. Fear-mongering networks throw anyone on as “analysts” nowdays. It is just like anyone in the IT world is a “consultant” now days (raises hand). Seriously, a 70% increase in gas prices every year till 2010 (when it has been at an insanely high 20% over the last 5 years) is absurd.

So, before anyone freaks out, the economics of gas prices rising 70% / year doesn’t quite work out with inflation still at an average of 4%. If that actually did happen, being unable to drive my car would be towards the bottom of my list of worries, topping the list would be getting access to food and not being killed in the riots that would inevitably follow.

The price of fuel has to come close to mirroring inflation for the oil companies to maximize their profits. Entire business models & industries are based upon this assumption. The oil companies can’t increase their profit margins if the price goes beyond what people, and especially companies, can afford. It is quickly approaching that mark and we’ll see a pretty sizeable drop soon. For comparison, there was a 20% drop a little over a year ago, and within the next couple months, my guess is we’ll be back to under or near $3.

Longterm (the next couple years), the mortgage crisis will balance out, the economy will stabilize, we’ll be out of the middle east, fuel-efficient cars will be more prominent, and thus… gas prices will stabilize again. In two years, I’ll 100% guarantee the average gas price will be under $7, and I would expect to see it under $6.  Yes, oil will eventually run out, but that trend is something that will be felt over decades, not months.

This energy “crisis” is even more reason to tell McCain and his “no gas tax” to take a hike and quit trying to buy votes. Let this market fix itself. The more you muck with it, the longer it will take it to stabilize.

economy, gas, Politics