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Get ready for higher gas prices

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Filed under: Debt, Transportation, Recession

I filled up my car today for $2.05 a gallon and thought it was too much. Now I read that much higher gas prices are expected in the near future.

The world is "risking a second spike in oil prices," according to a new study by consulting firm McKinsey & Co. More than 90% of the growth in demand for oil over the next decade will come from countries with developing economies such as China and India, McKinsey found.

Well, I don't get it. This is one part of the economy I just don't understand. A few months ago, I was paying close to $4.50 a gallon and then it dropped, presumably because demand dropped. But I have seen the price change 10 cents per day at times or spike dramatically because there is a problem with a pipeline somewhere. Are the oil prices really this sensitive or are prices simply increased whenever there seems like an excuse to do so. After all, they already have reserves that they bought at a set price, how can the price increase immediately just because of a pending hurricane?

All this may explain why the oil companies had record profits last year. Exxon reported the highest quarterly and annual profits ever for a U.S. company in 2008, boosted in large part by soaring crude prices. Supposedly, problems at several refineries also led to higher prices.

These kinds of problems are not going away. We are just having a break from soaring prices. Our plan is simple, any future cars we buy must get at least 50 miles to the gallon. We are also looking at going down to one car for the family. It would be cheaper to rent an extra car when we need it than to have two cars draining our pocketbook. I don't want to spend my discretionary money making the oil companies rich.

Barbara Bartlein is the People Pro. For her FREE e-mail newsletter, please visit: The People Pro.

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