Wednesday, March 2, 2011

Gas Prices

Well in case you guys have not noticed, gas prices have skyrocketed in the last few weeks and days. It is $3.34 at the Shell Gas station near my house in Northern Virginia. I remember two weeks ago it was only $3.15. This is supposedly due to the crisis in Libya but in reality it is just investor overreaction. Libya only accounts for 2 % of the worlds crude oil supply. That small of an amount can be made up easily but has still cause an average of a 25 cent increase in gas prices in the United States since Feb. 20th.

What I worry about is not how much oil is left in the world but the rising costs. There comes a point in time when Americans cannot afford 6 or 7 dollar a gallon gas. This can be very crippling to the economy. I think were in a phase were gas prices will rise to levels in which we cannot afford it and this will cause a big pullback in the stock market along with gas prices. Then the trend will continue and gas will go up once again until we cannot afford it. Then another crash will come. There will be no loss of market value, however we will continue on a rather bumpy course and end up in the same place ten years down the road in the DJIA. 

6 comments:

  1. I dont think they will raise THAT much...

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  2. I suppose that's per gallon? It's about 1.2 per L in my area. Sure am glad I take the bus everywhere!

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  3. I'm afraid the growing demand on oil from other countries (China wants more cars, and bigger) along with actual depletion of oil sources (which, by my knowledge, can occur) may make the trend even more devastating. This, combined with some other crisis that is likely to happen, might prove really challenging to world economy and do some really nasty things to the us economy, am I right?

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  4. gas prices are the worst right now. all of this has to change soon! :(

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  5. Meh, when you adjust for inflation prices are still lower than they were in the '70s, and if they get THAT high again we can always cope the same way they did (cocaine).

    Besides, it's like twice that expensive in Britain :)

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