Worried About $4 Gas in 2009? You’re Not Alone

The stock market is cratering, home prices show no sign of bottoming and unemployment may very well hit 10% or higher this year.

In the past six months, essentially an entire decade of “created wealth” has been erased.  Surely things can’t get much worse this year, right?

Apparently they can, says a recent poll on Daily Fuel Economy Tip.  According to a survey of nearly 300 people, nearly half expect $4 gasoline to return during 2009.

The poll asked “When do you think gas will return to $4/gallon?”  Here’s how the responses broke out:

  • 52% said in 2009
  • 11% said in 2010
  • 16% said in 2011
  • 21% said in 2012 or beyond

I think it’s probably safe to say that much of the worry over $4 gas in 2009 can be attributed to the general negative (or at this point is it realistic?) attitude regarding the economy.

After all, with nearly all of the industrialized world suffering through this together, the demand for both oil and gasoline isn’t likely to shoot up any time soon.  Couple this with the fact that hundreds of billions, if not trillions of dollars have rushed out of the commodities market — in particular, non-precious metals — and it appears as if we’re in a situation where both oil and gasoline prices will be range-bound for a while.

Even with the aggressive production cuts implemented by OPEC over the end of 2008 and beginning of 2009, it seems hard to envision a scenario where oil and gasoline prices climb as quickly and as high as they did the first six months of 2008.

However, with most central banks around the world lowering interest rates to record lows and some — including the Federal Reserve — running their printing presses pumping trillions of dollars into the money supply, my fear is that once this current recession ends or at least plateaus, we’re going to see a dramatic drop in the value of the dollar.

As you may recall, the dollar’s falling value was one of the major contributing factors behind the “great commodity run up” of the first six months of 2008.

Unless, of course, these central bankers have a strong exit strategy to reduce the money supply without crippling economic growth.  Unfortunately, I don’t have much faith that they do.

Comments

  1. I am glad someone is placing opinions about the constant increase of fuel costs.

    I am new to your blog and i would like to comment on your excellent work.

    I run a removals company in the UK but we have recently moved a family to the US. Many years ago it was perfect for us in the reality that the pound was high against the dollar and then fuel was cheap in the US.

    This has now changed dramatically the dollar is at an all time high against the pound and then the fuel is more expensive than ever within the US.

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