Two years ago in this blog, I wrote a futuristic column  from April 20, 2009. The title of the column was “Remember When Gas Was Cheap?” At that time I predicted that the price of oil in early 2008 would reach $125 and that in April 2009 it would be $137.
In January of 2007 I was invited on the “First Business” syndicated business program to discuss the price of oil for the remainder of the year. At the time the price was $53 a barrel. I basically told the flabbergasted reporter that I thought the price of oil would most definitely cross $80 a barrel and would approach, but not reach the $100 a barrel price. The counterbalancing view was some “oil industry expert” who said the price range for the year would be $50-70 a barrel. Of course we know what happened.

Last fall I wrote a column predicting that the trading range for the price of oil would be $80-125 for the next two years. I now want to revise that forecast. When I made that prediction, the price has recently crossed $80, charting new territory. While obviously not surprised, I did let all the disbelief I had been subjected to in my predictions to give me a sense of caution. Since $80 was the new high, and I was saying that it would be the price floor for the foreseeable future I thought it would be a correct floor. I did say in that column that …

Regular readers of this column know that I have long predicted that oil would reach and then exceed the $100 price barrier.  In fact, when this barrier was first breached the first few days of January, readers congratulated me on the veracity of my prediction.  Yesterday was the first time that a barrel of oil actually closed over $100.  This drove the stock market down, made economic prognosticators nervous and created headlines across the country. 

Six months ago I predicted that the trading range for a barrel of oil will be $80 – 125 for the foreseeable future.  The current global marketplace is such that it is hard to imagine the price dipping below $80 but there are a lot of scenarios that could ultimately drive it above $125.   The actual trigger for the recent price increase is an explosion in a Texas refinery that processes 70,000 barrels a day, which is less that one half of one percent of the daily U.S. consumption of 20 million barrels a day. That is how tight the oil market is.  There is little or no excess refining capacity in the world.

Demand is and will consistently outstrip supply in the oil market.  Any perceived fall off in U.S. consumption due to an economic slow down will be more than offset by the increased demand from China and India and other developing countries.  This will be a constant for the foreseeable future.  When one layers on top of that supply/demand tension such things as …

There is a lot of pessimism in the air.  As we come to the end of the first month of 2008 it seems that many are in a negative, hunker down state of mind.  The stock markets are being fueled by fear.  The commentators are speaking as though a major recession has begun. Casualties continue at too high a level in foreign combat, and of course it is cold and dark outside for much of the country.  All this in a country that seems to have optimism in its national fiber. 

The Pew Research Center just published a study that basically states that people are more pessimistic than usual coming into 2008.  The Pew Center has consistently polled Americans in December about whether they think the following year will be better or worse that the year just ending.  The numbers for December 2007 were that 50% of the people thought 2008 would be better, and 34% thought it will be worse.  This compares to 57% and 28% in December 2006.  In December 1998 the numbers were 59% and 25%.  Finally, in the middle of the Internet bubble, 66% thought that 2000 would better than 1999 while only 19% thought it would be worse (in spite of the looming Y2K fear that was rampant that month).

 Fear seems to spread virally …

In the last post I suggested that the U.S. learn from Europe in the use of high speed trains as a core component of a national transportation system.  Trains are more energy efficient than cars, give off far less greenhouse emissions than airplanes, rarely get cancelled or delayed due to ‘weather’ or ‘flow control’ and depart and arrive near the central city.  Given that America is much larger than any country currently utilizing high speed trains, it can only be a part of the transportation mix.  What might the composite national transportation profile look like in 2015?

High speed trains could operate in the highly populated corridors mentioned in the last post.  These are mostly on a north-south axis.  Utilization of these trains would alleviate congestion in the air and at airports.  Airlines, using ever more fuel efficient planes, could be the primary transcontinental and east-west transport.  Airports in cities served by high speed trains could have direct local trains connect to the central train station.

By 2015 a significant percentage of cars on the road can be plug-in hybrids or pure plug-in vehicles.  Both GM, with their Chevrolet Volt, and now Toyota have promised mass production of plug-ins by 2010-2011.  Currently Americans keep their cars for an average of 8 years.  Hybrids are already being sold.  This means that by 2015 50% or more of the cars on the road in the country can be either pure electric or hybrids.  The benefits of this are obvious:  much lower consumption …