When Oil Demand Slackens
It’s affected everybody’s pocketbook and people have pared back on their spending. This has put the economy into an even deeper tailspin. Paying for gas (a non-productive use of money for consumers) instead of goods and services like shoes, televisions, and home improvements is just a waste of money, so people have not only decreased their driving, they’ve had to refrain from spending on consumer goods and services.
I’m doing my part to keep the economy afloat: I’ve had a tree service come out and care for a rather large tree in the backyard, we’re going to be calling some landscapers very soon to get bids on sprucing up our yard, and my wife bought a whole lot of picture frames to put up with our boys’ pictures in them.
I went to Home Depot and Lowe’s yesterday to pick up a few things for projects I’m working on in the house; Saturday afternoon was a ghost town in both stores, with one checkout lane open. The parking lots were empty. My wife and I drove by the mall on Friday; while the parking lot was pretty full, we both thought out loud about whether people were shopping or buying. Shopping is actually a drag on retailers, in that they have to work harder to maintain stores that people “shop” in for less in sales; I know, I was a retailer for years.
A lot of folks are predicting that oil will fall to $70. I’d like to see it drop to $20, but I’m that kind of guy. I’d also like to see us lessen our dependence on oil, both foreign and domestic, because it’s really a commodity that has outlived its usefulness. Don’t get me wrong: The global economy would tank if oil fields all of a sudden dried up. We are so dependent on it for so many things and we’ve known for a very long time that this was coming. After all, we’ve had price spikes a few times in the last few decades, but we’ve always dodged the bullet when prices fell precipitously back to normal, or sub-normal, levels. Only now has the price of oil risen to its highest inflation-adjusted level; the previous high was in 1980!
Part of me hopes that oil stays above $100; demand for oil drops noticeably around that level. However, the part of me that makes the money and pays the bill wants oil to drop to the $12 level it fell to after the first Gulf War. That would make me jump for joy; I might run naked down the street.
But that’s not going to happen.
Oil will undoubtedly rise and fall, but the trendline for the long term will be upward sloping. Take advantage of it now: Buy oil stocks on the dips. Those fat cats are going to get fatter as time goes on.