On the Panic Over Gas Prices

It is God’s kindness to terrify you in order to lead you to safety
–Rumi

What do I make of this? Here’s Brian Williams telling me on the evening news the price of gas will skyrocket this summer. Why’s that, Brian, when I’m staring at a chart showing a collapse of petroleum and gasoline usage?

Oil companies would love for high prices to persist, but storing gas is costly and, sooner or later the stuff moves into consumption channels at a clearing price that will tempt drivers to drive again.

I like Brian. Wish I could afford his tailor. But methinks he’s consulting an economist, and you know how wrong they are. Over at my broker’s, the economist is forecasting an economic recovery. Really? How come the sale of diesel fuel, a proxy for trucking and shipping activity is suddenly unraveling?

The way I see it, the economies of Asia, Latin America, Europe and the US are buried in crushing debt, and will be that way for years. Peak oil production may, indeed, have passed, implying restricted supplies over time.  But that argument has been around since the beginning of the decade and it didn’t keep oil from doing a swan dive in ’08 along with the other markets:

Crude Oil, Monthly

The oil crash in ’08-’09 was even greater than for stocks:

Dow Jones Industrial Average, Monthly

Both stocks and oil have had typical counter trend rallies, and both are now showing signs of exhaustion, so, to me, a rise in gas prices doesn’t compute. Strictly shooting from the hip, I say gas will be under two bucks a gallon by 2016. Sounds nice, but not many folks will be able to fill ‘er up by then.

Observations

For consumption to recover, we’d have to have a big time renewal in consumer confidence. My expectation is that with a global population of some 7 billion persons, there are probably twenty billion spending decisions made every day. For the next few years, most of them are likely to be made with the thought in mind to economize, either out of habit, fear, or desperation.

We know that conventional price forecasting is prone to error  because it is mostly done by projecting the present condition into the future. The situation today is very deceiving. We are seeing better business and more profits and, consequently, the forecasts are for a rosy economy and higher prices for things like gas. The Wave Principle indicates this will turn out to be wrong and the error of this assumption will be hardest on the unprepared. So do prepare.

Cheers,

Rod

The author makes no representation as to the accuracy of the quoted material, but believes the sources to be reliable. No one should consider any part of this presentation as a recommendation to buy or sell any securities whatsoever.

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