Even in the midst of the worst financial crisis since the 1930's, gas prices are still following their cyclical behavior by creeping upward as we approach the summer. Just a few months ago, oil began its steep decline, dropping from $100+ a barrel by about half. We heard news that there was an abundance of supplies due to weakening global demand, and that many containers of the black gold were stored away in an effort to limit supplies and hold prices steady. Refineries were also idled in an attempt to slow production. But now, there is word that supplies were "overestimated" and that means prices will be going right back up.
Consumers Watching Gas Prices
If you do a lot of driving or plan on taking long road trips in the summer, no doubt you've been following gas prices. Consumers have enjoyed steady gas prices till last month, as average gas prices have dropped 40% from their peak last year. US gasoline consumption has been low as well, dropping 1.2% from a year ago. But we may be seeing some short term increases due to supply shortage and OPEC and other oil producing countries hoping to curb overproduction.
Source: Market Watch
Fuel Prices Will Rise Inevitably
Many analysts expect fuel prices to be extremely volatile, as no one really understands how gas prices will react in light of the recession. One thing's for sure: Gas prices will be on a rapid rise once the recession is over and demand surges. An increase in fuel consumption in the summer may cause temporary spikes in prices, but over the long term the trend of gas will certainly rise.
As the recession gets worse with few signs of recovery appearing despite massive government stimulus infusions, now is the best time to start investing in low risk financial products such as bonds, CDs and high yield savings accounts. Despite federal chief Ben Bernanke calling an end to the recession later this year, no one really knows what will happen. It is best to invest in safe investment vehicles as a defensive play to volatility; you can become more aggressive and shift to stocks again once the market has recovered.
How will you cope with a short term rise in gas prices? How will this affect your summer vacation plans?