Polite Fiction

Oil prices have fallen lately. We include this news for the benefit of gas stations, which otherwise wouldn’t learn of it for six months.
~Bill Tammeus, in Toronto’s National Newspaper, 1991

There was a time when only the craziest naysayers warned of a housing bubble and when it burst I don’t think the craziest of the crazies predicted how dramatic the drop would be. Now we have a commodity that is increasing in price far more drastically than the housing market ever did…the oil market. I feel it’s safe to say that the current trend in oil prices can not be sustained by the current economy. I don’t even think it could be sustained in the best of economies.

OPEC might be shooting themselves in the foot with their reluctance to increase production. The drastic rise in oil prices are forcing normally stagnant people into adopting alternatives they never would have considered before. More people are carpooling, using public transit, buying hybrid cars, and limiting their travels. This will result in a drop in demand and an eventual drop in price (economics 101).

I feel that the changes people make to decrease their dependence on oil will become permanent and the trend will spread until demand drops to record levels. Almost all oil companies have nearly fixed margins so when demand drops so do their profit margins. That’s when I believe oil companies will waive the white flag and start decreasing price at a faster pace then when they raised them. Until then I’m going to have to delay the road trip.