Our Awful Situation

Pain at the Pump: It’s Time to Start Thinking About $7 a Gallon Gasoline

Posted by Charlie Kilo on June 12th, 2008

I’m getting burned out over speculative talk about gas prices, why they’re going up, and where they’re going to. I see several problems with this article:

U.S. consumers barely had time to get used to the idea of $4 a gallon gasoline before prognosticators started talking about $5 a gallon fuel.

And unfortunately for the U.S. economy, the worst is yet to come.

The average price of gasoline in the United States broke $4 a gallon for the first time Sunday, following a double-digit surge in oil prices last week. And despite an economy that appears to be in an increasingly fragile state, experts are already debating the potential for gasoline to hit $5 this summer.

But here’s what most economists aren’t saying yet: U.S. motorists could easily be looking at $7 a gallon gasoline within two years. And that could have a disastrous impact on the U.S. economy.

“The bottom line is that the effect on the economy is going to be a lot worse than anyone’s talking about right now,” said Money Morning Investment Director Keith Fitz-Gerald, a longtime energy bull who recently boosted his oil-price projection to $225 a barrel. “The bottom line is this: Until someone develops a truly [interchangeable] alternative for oil and gasoline - something that works the same, costs the same and is just as effective - Americans are just going to have to face the fact that over time they’re going to pay more.”

First off, I don’t think society will bear anything above $6 a gallon of regular gas. Second, developing alternative gas replacement will take at least 30 more years. The only alternative we have (beyond looking for alternative means) is the drill in Americas plentiful oil reserves and release more supply into the market place. The question is: With record profits are oil companies even willing to drill in order to increase supply? With a limited supply and ever increasing demand oil profits will only continue to climb.

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Our Awful Situation

Pain at the Pump: It’s Time to Start Thinking About $7 a Gallon Gasoline

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