If Gas Prices Fly As Expected, Busineses Need To Ground Themselves To Avoid Crashing

Things that are headed up these days: unemployment, foreclosures, adorable Pixar characters whose houses are attached to helium ballons, Daisuke Matsuzaka’s ERA and, argh, gas prices. A Russian energy group is predicting oil, which is currently just over $70 a barrel, will eventually pierce the stratosphere at $250, meaning it’ll pretty much be Mad Max time for everyone.

Worst of all, ballooning oil/gas prices will only drag the economy down.

Businesses that expect to thrive under such conditions will have to adapt surging gas costs into all facets of their business philosophy, the Chicago Business Examiner reports:

As consumers wait and watch and continue to spend slowly, businesses should develop strategies to help consumers deal with energy challenges not only for today but tomorrow as well. If oil reaches $250 per barrel consumer behavior will change drastically. Even If oil reaches $150 per barrel consumer behavior will change drastically. Any business that develops ways for consumer’s to lower energy consumption and expenses will shine. Whether developing an improved communication systems, more fuel-efficient cars, or methods to reduce travel, businesses need to think through energy pricing while developing and adapting their business plans and strategies.

Gasoline prices rising quickly is a two-sided problem, as gasoline prices rise people have less to spend on other consumer products which means businesses lose money. Businesses have less money because people are not buying their goods or services. We are undoubtedly shackled to oil and gasoline pricing and the more they increase the longer an economic recovery will take. It is critical that businesses adapt to gasoline price increases by developing corporate energy strategies that will lower costs wherever possible. Now is the time for business to lead and adapt not wait and react.

As a silver lining, expect unicycle and rickshaw stock to soar.

Gasoline price increases threaten economic recovery and businesses must adapt [Examiner]

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  1. MostlyHarmless says:

    Now on what basis is the russian energy group expecting the gas prices to go up to $250?

    I know its non-renewable and all, but even last year, the spike in crude prices was mostly a result of manipulation, bubbles and futures trading.

    Any idea what will cause the same this year?

    • winstonthorne says:

      @MostlyHarmless: Manipulation, bubbles, and futures trading. So long, and thanks for all the fish!

    • ThinkerTDM says:

      @MostlyHarmless: You can usually count on basic greed to make prices go up.

    • Jaynor says:

      @MostlyHarmless: The dollar is losing some world credibility (due to the fact that we’re printing trillions of the things) – expect commodity prices to raise as world markets look for other things to sink money into rather than the greenback.

      • MostlyHarmless says:

        @Jaynor: That does not explain the localized spike in the prices of oil at all. Thats more of a blanket “look out of hyperinflation!!” statement.

        @ThinkerTDM: Well, yeah, but how exactly. Whats the mechanism?

        • Jaynor says:

          @MostlyHarmless: Oil price spikes aren’t localized. It’s one of those commodities that is traded primarily on a world market (As opposed to say yak milk). A Russian energy conglomerate might be predicting the rise but it’s not going to be due to specific regional issues.

          In the mean time watch out for drastically spiking Yak Milk prices as Mongolians start hording it in their Yurts.

          • MostlyHarmless says:

            @Jaynor: By “localized” i meant “localized to oil” as in “why are only oil prices expected to spike? by your prediction, everything should spike independently”.

            In a hyper-inflation, everything becomes more expensive, as opposed to this (supposed) case, where high oil prices will drag other prices up.

            I have not seen any other reports from any other industry warning of ~350% spike in prices.

            [Generic "zomg hyperinflation" fear mongering reports dont count.]

        • MooseOfReason says:

          @MostlyHarmless: I’ve heard OPEC would raise prices to appease the countries that produce the oil. But that’s obviously not the whole answer, since people would buy much less gas if it were $7 or $8 a gallon (in America, anyway).

          Maybe it’s people who are worried about the dollar falling and are investing in oil because they think it’s a safe investment.

    • chris_d says:

      @Radi0logy:
      I’ve never heard any prediction of running out of oil by 2010. I have heard predictions of its production plateauing and/or starting to decline by then, however. And that’s all that needs to happen for prices to go up — demand outstripping supply. You know, the old supply-and-demand thing.

    • theblackdog says:

      @MostlyHarmless: About 2 weeks ago I heard on my local news station in DC that it looked like speculators were starting to get back into the oil market because prices had gone up, so I would not be surprised if it does go through the roof again because they’ve come back.

  2. karlrove says:

    Gee, what interest could a Russian energy group have in oil prices skyrocketing?

  3. heybtbm says:

    EVERYBODY PANIC!!!!11!

  4. downwithmonstercable says:

    This is the exact opposite I’ve heard out of every news outlet and forecasting group. Prices aren’t supposed to hit $140 a barrel for another 10 years, but are only supposed to steadily increase.

  5. yoni242 says:

    And here I was lookingto buy a truck or suv for work. Russians always have to ruin my plans.

  6. Radi0logy says:

    Weren’t we supposed to be completely out of oil by 2010, at least according to 1990? And wasn’t it supposed to be like 120F in the shade? And wasn’t cannibalism supposed to run rampant?

    I have a hard time putting any stock into reports like these any longer. I know oil reserves will eventually run out. It will suck when that happens. But it isn’t happening soon.

  7. Fineous K. Douchenstein says:

    This BS is predicted EVERY year. Oil prices are always on the verge of collapsing the economy according to the fearmongering speculators. They want people to panic so the prices really do continue to go up.

    And everyone predictably falls for it.

    • HRHKingFridayXX says:

      @wagenejm: You are correct that oil prices rise in the summer (always have). However, last summer’s oil inflation was a tipping point in the housing market wreck. People had gas bills as big as their subprime mortgages, something had to give. That’s where you’re wrong, this *is* a big deal, not just the regular bs.

  8. Eyebrows McGee (now with double the baby!) says:

    My current plan is to purchase corner lots in neighborhoods and put up livery stables so that people can stable their horses at my livery stable instead of having to get variances for their own properties and then clean up all the poop. Then everyone can just trot downtown for work, to where I’m sure some enterprising parking garage will convert itself to a multilevel stable.

    As a side business, I will sell the poop to my hay and oat suppliers as fertilizer.

  9. Underpants Gnome says:

    Unfortunately, these predictions of high oil prices seem like self-fulfilling prophecies. People declare prices will be high, more people buy up futures, driving prices higher. Yay! Everybody Wins! (except us joe-twelve-packs, of course)

  10. Etoiles says:

    They already raised all of the prices and shrank all of the products and added all of the fees when gas prices jumped to $4.50 LAST year. And then, oh-so-mysteriously, the prices failed to drop and the fees failed to vanish and the items failed to get larger over the winter. And yet, when gas goes back up to $4, somehow I expect they will start the cycle again.

    • catnapped says:

      @Etoiles: Oh absolutely…I expect any day now you’re going to see retailers and/or manufacturers start whining how they need to raise prices/shrink their products again.

  11. pot_roast says:

    The reason for the current “rally” is that investors and speculators have gotten right back into the market and are driving prices up by buying & selling a product they will never take delivery of. (source: most every financial article about current oil prices out there) .. Supply is at a record high, demand at a record low.

    Oh, and OPEC continually cutting output. They have stated several times that they need oil at $80 to continue to fund construction in the OPEC states. Like more 24k gold toilets in Dubai. OPEC is fleecing us. We should be drilling here, and now. We could reduce dependence on OPEC oil quite a bit, and the way they’re acting, any bit helps. Oil prices affect a LOT more than just gas prices. Keep that in mind before saying “just ride a bike to work.”

    • Notsewfast says:

      @pot_roast: Your sources are impeccable. OPEC has its issues, but the current spike is attributable more to reality than to conspiracy theories. A couple of things:

      1. Banks, Auto companies, etc. We just gave large amounts of cash to the lot of them while running a budget deficit. Spending with a budget deficit means that that money has to be created by The Fed. As more dollars are created, the relative value of our currency gets weaker. A weaker dollar means price inflation. Since Oil futures contracts are denominated in US dollars, inflation takes a toll on these contracts in a very direct and immediate way. Futures traders know this and bid the price of oil up in an attempt to keep from losing their hats if inflation hits as hard as some expect. The reality is that if there aren’t buyers at a specific price, oil prices won’t rise.

      2. Summer. Every summer the demand (or at least expected demand) rises, and traders in anticipation of a spike in demand, bid the price for oil contracts up. See last summer, the summer before, and so on…

      The ‘Rah Rah drill here, drill now’ arguments will do little to alleviate either of these issues, so if you can a.)stop the summer form coming or b.) figure out another way out of the economic pickle we’re in, my advice is to wait it out and, if its a major issue for you, drive a smaller car.

    • catnapped says:

      @pot_roast: You do of course realize that domestic oil companies also have every incentive to shrink supply to get and/or keep the price higher, right? They ain’t gonna “DRILL DRILL DRILL” if that means prices will drop because of it.

    • chris_d says:

      @pot_roast:
      Where’s all this oil you’re going to drill? Alaska? The estimates of the ANWR recoverable is ~6 billion bbl. That’s a drop in the bucket — about 250 days of U.S. usage. Where else do you plan to drill?

  12. Saboth says:

    I think the Russian energy group is trying to create demand for speculators. Gas shouldn’t even be as high as it is, except for the speculative trading. Just like last year when it was $4.00 a gallon, it should have never reached that point. Honestly, I think the federal government needs to step in on oil trading. It just influences everything in our economy too much to allow traders to create so many problems.

    • MostlyHarmless says:

      @Saboth: i’ll be waiting here with my popcorn when the government does that. It will be fun to watch the anarchists go all insane and squirm in pain.

    • HRHKingFridayXX says:

      @Saboth: Indeed. Remeber when gas was at a high last year and everyone started taking Putin seriously?

  13. ogremustcrush says:

    Didn’t the last time oil prices rise it was largely the fault of the futures markets. Which is exactly what stupid crap like this pushes up. Self-fulfilling prophecy much?

    We freaking need to ban the purchase of commodity futures in cases where delivery is never taken.

    • MrEvil says:

      @ogremustcrush: A simple rule of “YOu ain’t got it, you can’t sell it” would be easy to enforce and would be very hard to BS your way around. It would also stabilize OTHER commodity prices such as farm produce. If those buying futures contracts actually had to take delivery of product it would cut down on the day-traders, and put the buying of Commodities in the hands of those that will actually use them.

      Really futures were originally intended to help Industry stabilize its input costs. A Flour mill could buy wheat futures to ensure they had adequate supplies for anticipated production at a predictable price. In Exchange both parties determine the price and are obligated to buy/sell at that price regardless of what the going rate is for non-contract wheat.

      Now the futures market is plagued with middlemen who buy something only to raise the price and immediately resell it.

  14. lotussix says:

    i love the baseball reference…. but.

    Chien-Ming Wang’s ERA is almost TWICE that of Matsuzaka’s.

    Wang: 14.34
    Matsuzaka: 7.55

    as of 6/15/09 0951 CST

  15. Todd Miller says:

    The sad thing is that everything the media puts out regarding oil is pretty much BS. Example…supplies are up but prices are up. Make sense….of course not.

    Oil companies and traders are getting rich at the expense of the working man.

    • econobiker says:

      @Todd Miller: Remember that the “media” is just another manufacturing industry now pushing the latest “man bites dog” story.

      • catnapped says:

        @econobiker: The owners of the media likely have a vested interest in higher energy prices as well (you don’t think they just have stock in their own company, do you?)

  16. pecan 3.14159265 says:

    So I think this is a good time to start Pi’s Unicycle and Rickshaw Emporium.

    • Kimaroo - 100% Pure Natural Kitteh says:

      @pecan 3.14159265: You should also include Tricycles.. I love tricycles.

      • pecan 3.14159265 says:

        @Kimaroo: Come to Pi’s RUT Emporium! Get out of your ‘Rut’ with a Rickshaw, Unicycle or Tricycle!

        *Seriously, I think I’m onto something.

    • Trai_Dep says:

      @pecan 3.14159265: Cyclo, baybie. It’s the only human-powered transport that rates.
      You haven’t lived until you’ve been in a cyclo grazed by another then watched the two drivers almost exchanging blows, while peddling furiously, as both passengers eye the incoming cargo trucks driven by Saigonese drivers (i.e., pray for merciful, quick death) then at the last second both veer around certain death and go along their way as though nothing unusual happened.
      You’ve never felt more alive than the feeling you get stepping out of a cyclo during Saigon Rush Hour.

      • MostlyHarmless says:

        @Trai_Dep: …

        • Trai_Dep says:

          @MostlyHarmless: Ah, you ellipse, but seriously: you’ve not lived (assuming you survive) until you’ve taken a roundabout turn in a cyclo during Saigon rush hour.
          Scout’s honor, they make Boston drivers almost seem life-embracing, traffic law-observant Sunday drivers. Instead of the blue-streak cursing, two-dimensional Kamikaze they actually are.

  17. Kyle Simmons says:

    Well the other thing is that I think people have learned their lesson for this particular generation about high gas prices. The prices in general went down because demand dropped sharply when the prices skyrocketed. People took a really realistic look at what they could save on gas, and when the financial crisis hit badly right after, it wasn’t exactly going to drive demand up. I too think $250 gas is a big rumor. And I agree with the ideas that the media is sort of perpetuating it.

  18. jdmba says:

    While it will hurt the economy as shipping prices get passed on, and probably give the airlines incentive to further raise their fuel surcharge (which never went away), the benefit in Los Angeles will be reduced traffic. Only when gas finally was hovering around $5 a gallon did I start to see less traffic. $10 a gallon will probably make the streets bearable.

  19. gStein_*|bringing starpipe back|* says:

    fuck this, i’m getting an EV1.
    …oh wait…

  20. Trick says:

    Oil companies figured out what they could do before Americans will cut back… anything over $4.00 a gallon will force people out of their cars…

    So expect gas to go to $4.00 and stabilize with a few spikes to pad the quarter reports.

    • wkm001 says:

      @Trick:

      I could not agree more. They know exactly where our limit is. The only problem now is, our demand is staying low. But they found another way to drive prices up. Let the greedy ass people on Wall St. determine the price so they can make a buck too. Didn’t they have a hand in the housing market collapse? Hmmm, maybe we should start by getting some of the soulless non ethical bastards out of Wall Street.

  21. Euglenas says:

    I’ve wanted to be the Road Warrior most of my life. Every time it seems like society is going to collapse, it never happens. I’m not getting my hopes up this time either.

  22. Trai_Dep says:

    Damn. I just knew I’d someday regret trading in my supercharged V8 for that Prius with the built-in iPod player and flower vase.

  23. sashazur says:

    Aren’t the russian media the ones that report on UFO landings with a straight face?

  24. Jesse in Japan says:

    250 dollars, or, as it will be called at that time, “12 Euros.”

  25. Anonymous says:

    The Russian Oligarchs and the Russian government (aka Herr Putin) have seen their fortunes take a complete 180 degree turn with the economic crisis and the drop in oil prices. Civil unrest is beginning to boil in some areas.
    The Russians will do anything to get oil prices back up in order to keep their population in order and because it’s the quickest way to superpower status, for which they feel entitled to have.