How much did you pay for your last tank of gas? I paid $4.81 a gallon. Granted I was in South Africa, but it was scary watching the rand (South Africa’s currency) fly at the pump while the litres (or gallons, as we do it here) just crept along.
Then when I returned home, I saw a headline in Barron’s magazine that really caught my attention: “Oil will hit $300 by 2020.” A leading analyst lays out the case for why the price of a barrel of oil will go cra-zee because of simple supply-and-demand market forces. The analyst even gets detailed enough to predict the price of a barrel will bounce around through 2014 and then from 2015 just start going up and up.
How accurate is this prediction? I will tell you that no matter how brilliant somebody is, it’s very hard to make accurate predictions like this, especially in a commodities industry. I recall a few years ago when an article in Forbes called for oil at $40 a barrel when it was then around $110 a barrel. They were wrong then and Barron’s could be wrong now. These things are just too complicated to call.
The reality is we have no control over the cost of a barrel of oil as a country or as individuals. But what we can control is how many gallons of gas we need to move ourselves down the road.
The marketplace is changing so much with new alternative fuel vehicles coming and hybrids going mainstream. Electric cars and plug-ins hybrids are today the science experiments for pointy heads that hybrids once were. Getting highway miles per gallon of 40 on a vehicle will be pretty easy the next time you shop for a car.
So should you go out and buy a newfangled electric vehicle like a Chevy Volt or Nissan Leaf in response to the Barron’s report? From a dollars and cents perspective, the answer is no way. It’s way too early and you’ll be a “pioneer” who gets financially slaughtered. You might instead want to consider being a “settler” and prospering by getting a hybrid that actually makes financial sense.
But in the end, nobody really has a clue what gasoline prices will be even 6 months from now, let alone in 2020. You can guess by using figures about crude oil that’s in storage, the amount of crude coming out of ground and so on. But those are only educated guesses.
The only thing you can truly control is how many gallons you need to burn!