The High Cost Of Oil

The U.S. economy has been designed to use massive amounts of cheap oil to transport massive quantities of goods over vast distances. When the price of oil goes to $100 or $150 a barrel, it fundamentally changes the dynamics of our economic system.

Nobody has ever been able to prove that the U.S. economy can successfully handle a price for oil over $100 for an extended period of time.

Do you remember what happened back in 2008? The price of oil hit a record high in June and then the entire financial system came unglued just a few months later.

The price of oil affects the price of almost everything else. Almost all forms of economic activity use energy. Almost all goods have to be transported a significant distance.

When the price of oil goes too high, some types of economic activity simply become unprofitable. If the price of oil stays this high from now on, there are many businesses across America that will be forced to close.

A high price for oil is also going to hit U.S. consumers really hard. According to AAA, the average price of a gallon of gasoline in the United States is now $3.70.

Many are convinced that the average price of gasoline is going to shatter the all-time record of $4.11 that was set back in July 2008.

So how much did a gallon of gas cost a year ago?

One year ago the average price of a gallon of gasoline was just $2.83.

Over the past 12 months the average price of gasoline has gone up about 30%.

So has your paycheck gone up by 30% over that time?

The truth is that wages have been very stagnant in the United States for a long, long time.

That means that U.S. household budgets are being increasingly stretched. People have to fill up their cars so that they can get to work or to school. Americans can cut back on pleasure driving to save money, but most of the driving that all of us do is to get to places that we have to be.

So if gas costs more that means that consumers are going to have less to spend other places. Consumer spending accounts for approximately 70 percent of the U.S. economy, so any slowdown in U.S. consumer spending would be extremely significant.

Already a substantial percentage of the American people are feeling quite stressed about gas prices.

According to a recent Associated Press-GfK poll, approximately two-thirds of the American people believe that rising gasoline prices will cause significant hardship for their families over the next six months.

We are heading for some really difficult economic times.

So the question is, what can we do about the higher costs of oil. Fuel Direct!

Gas Prices May Hit $5 Per Gallon By Memorial Day

Earlier this week, market analysts warned that the price of gas may reach $5 by the end of summer. Now they are saying we could see that price by Memorial Day as the situation in Libya deteriorates.

On the S&P 500 today, the price of Brent Crude breached $119 a barrel during a period of frantic trading. Brent Crude is used to price two thirds of the world’s internationally traded crude oil supplies. The price was below $100 yesterday afternoon.

The world’s oil benchmark jumped almost $17 this week and it appears there is no end in sight as the situation in the Middle East heats up.

Saudi Arabia is under pressure to boost output as the prospect of a Libya production cutoff looms.

Oil traders said Saudi talks with Europe signal that the oil kingdom understands that the political crisis in Libya is now an oil supply crisis.

On Thursday, the Italian oil company Eni, the most active company in Libya, said oil production from the North African country has dropped to just a quarter of normal levels.

“You can only expect the price to go up. It is fear of the unknown. The risks are all to the upside,” a senior oil trader told the Financial Times. “Saudi Arabia needs to respond.”

Popular uprisings spanning the Middle East have yet to seriously affect Saudi Arabia. In an effort to stave off rebellion, earlier in the week Saudi Arabia’s ailing King Abdullah promised to lavish around $37 billion on his subjects. The money will go for housing, education, social security, and other benefits.

In neighboring Bahrain, a similar pay-out scheme failed to stem protests that turned violent. King Hamad had offered to pay $2,650 to every Bahraini family. The protests calling for political change have seriously damaged the small nation’s economy and tourism industry. Standard and Poor’s lowered its credit rating this week and Bahraini authorities canceled next month’s Bahrain Grand Prix Formula One race, the pride of the royal family.

According to Saudi rights activist Hassan al-Mustafa, Abdullah’s spending won’t solve anything. The Saudi people want “real change,” such as an elected parliament and more rights for women. That sort of evolution “will be the only guarantee of security of the kingdom,” explained al-Mustafa.

Hundreds of people have backed a Facebook campaign for a Saudi “day of rage” in March in response to the lack of political change in the kingdom and it solidarity with other popular rebellions sweeping the region.

In response to the unprecedented rise in oil prices, analysts are predicting the price of gasoline will shoot up ten to fifteen cents per gallon over the next few days.

Analytics economist Chris Lafakis put the number even higher. Oil prices have already jumped $12 this week, which means that drivers can “expect gas prices to be 37 cents higher” in the coming days, he told CNN.

The national average price of a gallon of gasoline rose 3.4 cents overnight to $3.228, according to AAA.

The answer to high gas prices: Xp3 Through Fuel Direct saves between $0.40 to $0.90 per gallon.