Wednesday, May 07, 2008

Enough to Give You Gas

Update: Kvatch has a good post on the same subject with some interesting numbers over at Ragebot

While I wait for my files to FTP over I have a few minutes to talk about a subject that is getting nearer and dearer to our hearts and that is gasoline.

Yesterday, Goldman Sachs analyst Arjun Murti predicted that the price of crude oil could hit $150 to $200 a barrel sometime in the next 24 months and maybe even as quickly as 6 months. On his comments crude oil in New York quickly jumped to as high as $122.73 a barrel before closing at $121.84.

What does it mean to us regular folks if crude oil goes to $150 or $200? What does that do to prices at the gas pump? There is a rule of thumb that says for every dollar increase in crude prices gas at the pump goes up a nickel. If we start from yesterday’s national average price of $3.61, a crude price of $150 means about $5 a gallon at retail. Ouch! If we go a little further to $200 a barrel for crude then we are looking at $7.50 or so at the pump. Double Ouch! How much will it cost you to fill up your car at $7.50 a gallon? I think my Hyundai Azera holds about 18 gallons and filling it up would whack me for $135.

We all see the price of gas in personal terms because it is our wallets most affected but the picture is really much broader than that. Nationally, in just the first 4 months of 2008, we spent $757.24 million more a day than we did in the first 4 months of 2002 according to Peter Beutel of Cameron-Hanover . Just to put this into perspective we are spending about $720 million a day in Iraq.

We are all feeling the pressure from increasing energy costs and not just at the filling station. Prices for everything are being impacted by oil costs and especially food. Everything that moves by highway is absorbing the increased cost of diesel fuel which is now handily above $4 a gallon most everywhere.

There are other things that are a little more subtle. Airlines are already struggling. What will a doubling of fuel costs do to them? What about American auto manufacturers? Chrysler is already in deep trouble and unless the Americans can retool quickly and start producing the kind of fuel efficient cars other countries already have they are toast and that means thousands more American jobs lost. Transportation costs are going to affect virtually every facet of our society and I fear it going to be painful. Even the waitress in a restaurant in a tourist destination town is going to feel the pinch as fewer and fewer people can afford to travel and she loses customers and tips.

Hold on for a bumpy ride.

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