Still, a prudent tack for investors -- or heads of households/husbands/wives, for that matter -- is to look beyond the short-term conditions and try to gauge longer-term trends -- trends that may uncover investment opportunities.
Short-term, oil is likely to correct, many economists agree. Oil at one-hundred-twenty-five bucks per barrel is well above what many economists and analysts believe is a price capable of sustaining adequate U.S. and global economic growth. Speculators have pushed oil higher than what it should sell for based on fundamentals, and a pull-back is likely in the quarters ahead. That will take some pressure off gasoline, diesel and heating oil prices.
But what about long-term? Short-term, gasoline prices should moderate, but is $4 gasoline a high point? Probably not, if current global oil consumption trends continue. What's more likely? Additional, steady rises in gasoline, diesel and heating oil prices in the years ahead, particularly if the U.S. economy shows signs of a recovery later in 2008.
In other words, after a momentary lull, fuel prices march ahead, and $4 per gallon could very well represent a floor as first $5, then $6 per gallon gasoline arrives.
U.S. economy: structural changes ahead
If the above proves to be an accurate forecast, that suggests long-term structural changes in the United States economy, culture, and way of life.
Readers have no doubt already implemented a few changes, and our own BloggingStocks' Peter Cohan has written about one of them: the rise of the 'staycation' -- or vacations closer to home. Think about what that trend means for the car trip-dependent travel industry, and its impact on hotels, resorts, restaurants, and lateral services.
Here are a few other changes the era of high energy prices is likely to propel:
- Housing. Of course land, amenities, school quality, and other factors will continue to play a role in determining home values, but one can see how closer-suburbs will increase in value and distant suburbs will decrease, all other factors being equal. (Those of us, [including yours truly], who live in the metropolitan New York area have been familiar with this condition for decades, but one can see how it will be magnified by soaring transportation costs.) That 40-mile commute is no longer a drop in the bucket, cost-wise. Think about what that residential shift means for housing prices. And what happens to exurbia? Do many survive as self-sufficient locales? Or will many become ghost towns, places where few could afford to commute from?
- Commercial zones and mass transit. Similarly, commercial zones in towns, cities and neighborhoods on a rail, light-rail, subway, bus line etc. suddenly become more desirable. In some cities, density and high energy costs will really increase the value of "reverse commute" locations (city to suburb) on a mass transit line. Think about the implications for commercial real estate values at these locations. And what happens to shopping malls / business zones not on a mass transit line? If the store / company is 20 miles out of the way, will people want to shop or work there? If you own a business, is your location a lower-commuting-cost zone?
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What's your take on the era of high gasoline prices? What changes will you make? What changes do you think your employer or companies, in general, will make? Let us know what you think.
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Reader Comments (Page 1 of 1)
6-04-2008 @ 6:06AM
Dan Barnett said...
Another consideration is the changes needed in "Life Style". i.e. Kid 1 Softball Practice 3:00; Kid 2 Dance Class 3:30, Pick up Kid 2 at 5:30; Pick up Kid 1 at 6:00 & take to Boy Scouts by 7:00; Drop Kid 2 at home; Pick up Kid 1 at 9:00.
With $4+ gas, how long can this life style be continued? The very physical structure of the US is not really conducive to saving gas.
6-04-2008 @ 6:52AM
al coholic said...
I agree. Our work force has been very mobile ofer the years but that will probably change as well.
For example, I own a roofing company and nowadays I leave the big pickup in the yard as much as possible and drive around in a Toyota Corolla. I also plan my daily rounds very carefully so as not to waste gas, sometimes even choosing not to travel far from home base to estimate jobs.
Free estimates may soon become a memory like the the free air we used to get at service stations.
6-04-2008 @ 7:45AM
B. Harrison said...
The federal government is totally lying abut the inflation rate being less than 1%. In today's Miami Herald, FP&L - Florida Power & Light is seeking a rate hike of 19%; meaninwhile "regular" gasoline was $4.03 two days ago; and the costs of groceries and everything else is escalating dramatically due to the rising cost of petroleum.
This li like a doctor knowing that a patient has a rapidly developing type of fatal cancer, and yet telling the patient that everything is going to be okay.
The politicians are in a bind with their backs to the wall; it's an election year and Congress doesn't want the public to know how badly they have mismanaged our government and economy. Alan Greenspan bailed out of the Fed; and Karl Rove bailed out on Bush . . . that was the rats leaving the sinking ship.
None of these problems developed over night; it took years for all of this to occur. Congress was only serving the interests of the special interests groups. Meanwhile we have the same CEOs, CFOs, corporate management and Congressmen who allowed this debacle to occur, "leading" our nation. The stockholders and voters need to throw these bums out of office.
6-07-2008 @ 3:10PM
Lin said...
My feeling right now are that this government needs to stop all the give aways, special interest group bs, paying farmers NOT to grow, space programs and concentrate and spend ONLY on alternative fuels. This is at the very heart of the American ecconomy. They are pretty darn quick to tell the American public to cut back and readjust, well so should they. Pay cuts across the board for EVERYone in congress. Let them for once feel like the tax payers do. We have far too many of the good ole boys and girls left. With what these people get in retirement, not SS of course, they will never feel what the average American does. Both sides of the fence have been squandering our tax dollars on the wrong things and have us in a heck of a mess.