Gasoholics: Drowning in an Oil Addiction
Thursday, January 06, 2011
Over the next few days most water cooler talk will be about college football, inaugurations, and/or Brett Favre’s latest misadventure in texting. However, let’s not forget about fuel prices increasing at an alarming rate. Beginning at the end of September, the average price for a gallon of gas has gone from approximately $2.70 to $3.06. That’s a $0.36 increase in less than four months. Taking a longer view, two years ago gas prices averaged $1.65 a gallon and have nearly doubled in 24 months.
So what’s driving the price of gas up?
"It's an amalgamation of all these countries increasing demand," says Mark Waggoner, president of Excel Futures in Bend, Ore. "A little bit here, a little bit there—when you put it all together, it's a lot."
Some big investors have increased bets that oil prices will continue their ascent. Goldman Sachs, J.P. Morgan and a growing roster of major energy-trading banks expect prices to rise above $100 a barrel in 2011 and stay there. Mr. Waggoner estimates oil could push as high as $130 a barrel next year (Wall Street Journal, Dec. 17, 2010).
Essentially, small increases in demand within numerous countries equates to significantly higher demand within the overall crude oil market. The demand is being driven by economic recovery from the global recession in 2009 after gas prices were ridiculous in 2008. I’m sure you remember paying $4+ for a gallon of gas. However, today we’re only about 80-90 cents away from that and it appears most experts believe we’re going to continue to see a rise in gas prices.
I don’t know about you, but it’s frustrating to feel so helpless in this situation. For all of the green initiatives across the country we remain a nation drunk on oil. We depend on it, can’t function without it, and don’t control the majority of its production. Perhaps, my lament is one of a spoiled child who doesn’t get his way while countless millions in Africa don’t know where or when their next meal will come from.
Or perhaps we are enslaved to a different type of dysfunctional system with as little control over our situation? And I find it funny that so few are talking about the gradual and steady increase in gas prices over the last few months.
Just like an alcoholic we might not realize we have an oil addiction until it’s too late.
