Wednesday, July 9, 2008


Will We Ever See Cheap Gas Again?
by Terry Mitchell, CommenTerry July 9, 2008

With the way gas prices are soaring these days, many people are wondering if we’ll ever see cheap gas again. I believe we most certainly will – and we won’t have to wait a lifetime for it either. How can I be so optimistic?

Well, there are three major reasons why I can be reasonably certain that there’ll be a return of low gas prices some time in the not-too-distant future. And this does not count the additional drilling and utilization of alternative fuels that will inevitably take place further down the road.

First, gas and oil prices have gone up too quickly. These commodities are now significantly over-valued. Remember the dot-com bubble of the early part of this decade? Stock prices of many Internet-based businesses, fueled by investors’ insatiable appetite for such companies, were bid up to completely unjustified levels. That bubble eventually burst as those stock prices quickly shrank to reflect what those companies were actually worth. What goes up doesn’t necessarily come down, but what goes up too fast almost always comes back down – sometimes like an avalanche! Don’t be surprised if the gas and oil bubble bursts before too long.

Second, OPEC wants to keep us addicted to oil. These people know that if oil prices stay too high for too long, the rest of the world is going to find a way to wean itself off of that commodity. This is a very fearful prospect to members of OPEC, many of whom glean most of their national revenue from oil exports. At some point, they are going to make a proactive effort to lower oil prices. We’ve already seen Saudi Arabia, prompted by this very concern, promise to pump more oil. I believe other oil-producing nations will soon follow suit. And they will ramp up their oil production as much as they feel is necessary to force oil prices back down.

Third, people will soon have to have no choice but to use less gas and oil, if they haven’t been forced to do so already. This is especially true of those living at or near the poverty level. For them, it’s no longer a matter inconvenience; it’s a matter of survival. But others will also see the necessity to start using public transportation, trading in their gas guzzlers for hybrids, carpooling, riding bicycles, walking more, consolidating their trips, taking shorter (and fewer) vacations, and otherwise spending less time on the road. In addition, four-day work weeks and telecommuting will become available to more employees, as employers look for ways to cut operating costs in the wake of higher energy prices. All of these measures will result in lower demand. And when demand goes down, oil and gas prices will most certainly follow.

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