Filling Up at the Gas Station Could Soon Cost $200

Oil Prices Are Climbing… And Gasoline Prices Will Follow Suit

I’m feeling anxious. 

Not for me. For my fellow Americans. 

I’m in the U.S. this week, prepping for the upcoming International Living conference in Denver. On my way to the Mile High City, I pulled in for a pitstop in south Louisiana to see my kids. 

I rented a car in New Orleans and I’ve been driving around the last few days, hitting some old stomping grounds, and eating way too many foods that are not healthy: beignets, Raising Cane’s chicken fingers, barbecue, a fried catfish po’ boy. Supposed to have crawfish etouffee with my son for lunch today at a true hole-in-the-wall. 

But healthy eating isn’t the issue here. 

It’s driving. 

And the price that so many Americans are soon to pay. 

See, I’m stunned by how many gas-guzzling trucks and SUVs I see on the streets. On a four-mile drive to a beignet joint for breakfast, I counted 11 Cadillac Escalades. Apparently, they get 14 miles per gallon in the city, which really means they get about 10 or 11 in real world traffic. The countless Ford F-150 trucks I saw—the best-selling vehicle in the U.S.—get less than 20 mph when driving in the real world. 

The anxiety I feel is sort of like the “sympathetic pregnancy” pain an expectant father claims to feel. My anxiety is sympathetic. 

We’re going into a world where gasoline prices are going to hurt. Very, very much. 

Oil prices have been moving up again, and there’s good reason to believe that they are going to surpass previous highs in the range of $120 a barrel. The last time oil hit that level, gas prices at the pump topped $5 per gallon nationally and were $7 in some states.  

For an Escalade, that’s $150 per fill-up at $5 per gallon. 

Imagine barrels of oil at $150. Gasoline on a national average basis will likely be north of $7.  

Suddenly, filling up an Escalade is $200 per tank. 

An F-150 will require more than $160 for a fill-up. 

And that’s me thinking out loud. A Forbes columnist this week made the case for why oil will hit $300 per barrel. His rationale is tied to inflation and the rising costs for the technology needed to extract the next barrel of oil out of the ground. 

As it is, between 60% and 70% of Americans are living paycheck-to-paycheck, according to the various reports that have come out this year. There’s no way that cohort finds a way to slip a few hundred extra dollars of gasoline expense into budgets that are already stretched past breaking point and are being held together with chewing gum and elementary school paste. 

Something has to crack. 

That crack will be in retail for sure. We’re going to see a host of mid-tier retailers fall apart as higher oil prices force U.S. consumers to choose between designer clothes… and driving to work. Work will obviously win. 

That’s going to cause the economy to slow… 

Which will force the Federal Reserve to drop its unwinnable fight against inflation… 

Interest rates will retreat again. 

But gasoline prices might not. At least for a while. 

See, the problem is that the industry hasn’t been drilling enough to find new reserves to replace all the reserves we’re depleting every day. Yet demand for fossil fuels keeps growing. Green energy really isn’t having a big impact on global demand. 

The website Our World in Data shows that on a global basis, renewables like wind, solar, biofuels, etc. account for about 5% of total energy consumption. That’s electricity, transport, and heating needs. Oil, coal, and gas are 84%. (Nuclear and hydro are the remainder.) 

Those percentages don’t bode well for consumers in the medium term. 

Those percentages indicate oil prices are going to go much higher because oil demand will very soon outstrip supply.  

Higher prices will, of course, be a temporary phenomenon because, economically speaking, higher prices always beget more supply, which begets lower prices… at some point. 

Question is: When is that point? 

I can’t say. That’s all dependent on how long it takes to find an adequate supply of new oil reserves. How long it takes to tap them is anyone’s guess. If they’re out in the deep-water oceans, tapping them could take quite a bit of time… 

All I can really say with some certainty is that the green energy movement, for all the good is seeks to do, has brought us to this situation. They’ve scared companies and governments, and forced spending on green technologies that really are not moving the needle very much in terms of meeting global energy demand. 

Much higher prices at the pump are going to be the green movement’s legacy. We’re approaching an energy “super shock.” 

So make sure you have some oil-industry exposure (such as through the stocks in the Global Intelligence Portfolio)… and some Zoloft for the coming anxiety.