Don't Panic when Oil Breaks $120 a barrel in 2008!
After filling up my tank early this morning, I couldn’t help thinking it was July. And to be honest, if the weather wasn’t hovering around 30o F, I probably would have checked a calendar.
If you haven’t noticed, prices at the pump have been rising so far in 2008. According to the Energy Information Agency’s (EIA) petroleum report, the average price for gasoline last week was $3.13 a gallon.
Although I was paying slightly more than the average price, the fact that we’re paying over $3 a gallon during the winter doesn’t paint a good picture for the summer of 2008, especially considering pump prices have increased over 31% compared to last year.
Now, I’m just talking about prices in the U.S. I’ve heard a lot of horror stories coming from my readers across the Atlantic.
So my question to you is, “What’s your breaking point?”
The fivefold increase in oil prices over the several years hasn’t been able to lower demand. Lately I’ve had several people preaching to me that oil would significantly fall in 2008. The first thing they would do is point at the growth in U.S. oil inventories over the last month and a half. Sure, U.S. stocks of crude oil have grown for the last six weeks.
But it’s time to face some harsh facts:
- We’re importing more oil due to a decline in U.S. oil production.
- U.S. crude oil inventories are over 21 million barrels less than a year ago.
- Oil Prices have consistently failed to fall below $90 a barrel recently.
I’ll confess I may have been too quick to suggest that people are accepting $100 oil, but as a reader pointed out to me this week, “We have no choice.”
And I don’t see things improving.
Oil Prices Breaking $120 in 2008
Ever since the price for a barrel of oil pushed past the $100 benchmark, people have been asking me where it’s going from here. I’ve read a wide range of predictions, all of them dodging the question in some way or another. Despite a few of them suggesting prices will “inevitably fall”, most have estimated oil will average slightly higher than current prices.