Thursday May 01, 2008 at 12:52
Gas to hit $7/gallon by 2012 . . .
Wired has an excellent article that very succintly explains why gas prices are where they are and why they are probably only going up from here.
In short:
1. Oil Companies are making windfall profits.
2. Entering the Middle Class = Car ownership. Millions of people in China and India are entering the Middle Class.
3. Credit crisis forcing the Fed to cut interest rates, which places inflationary pressure on the economy, lessens the value of the dollar, etc. (basic Econ. 101)
4. Speculators forcing oil up.
5. And the reason Oil is likely to stay up? OPEC generally tries to keep prices at an optimum level, when demand raises prices they like to keep production even and take advantage. OPEC only controls half the worlds oil production, and generally when prices are high the non-OPEC countries increase production to take advantage of the high price and by increasing supply it brings the prices back down. Problem is, those countries seem to be running out of oil and can’t increase production.
Read the article, it’s well worth it.
