Rampant Inflation Plus an Impending Middle East War

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Recently by Eric Peters: Obama Math

The way things are going, gas prices will probably top $5 a gallon this summer. We may be lucky if it stops there. Some industry experts, including former Shell CEO John Hoffmeister, believe that a combination of bustin’ loose inflation and real fears about an impending war in the Middle East being pushed by neo-con chickenhawks will push gas over $5 per gallon by July. An actual war with Iran, courtesy of these chickenhawks, could push prices much higher.

It’s possible we’ll be paying $7 or $8 a gallon if there’s a U.S.-Israeli strike on Iran – god help us all.

Remember: It was $4 a gallon gas back in ’08 that triggered the economic free-fall we’re still trying to pull out of today. And while many of us have acclimated ourselves to the New Normal of $3-and-something gas, an uptick to $4 or more is likely to have the same effect it had back in ’08 – only worse because millions of people don’t have the reserve cash (savings, equity) they still had back in ’08 – many don’t even have a job.

It might be a good time to start thinking about how you’ll handle $5 gas – before everyone else starts thinking about it.

Now, for example, might be a good time to buy a motorcycle or motor scooter for “just in case.” Rising gas prices are a good excuse to indulge – and smart policy if gas prices do go through the roof. Not just because of the money you’ll save on gas, either. If the cost of fuel continues to rise, expect the cost of high-mileage transportation options to go up, too. Supply and demand. Simple. A used 50 MPG bike that goes for $2,500 today might very well draw $3,500 (or more) a couple of moths from now, in a world of $5 regular. Same goes for scooters. They were very popular circa ’08 – and popularity equals pay more. Right now, it’s still cold out and gas prices, though higher, are still manageable. I have a buddy who owns a bike shop; he also sells Chinese-made scooters. Things have been slow for the past year. If you walked into his store today, odds are you’d ride out on a good deal. But tomorrow? What happens when customers are lining up for his 80 MPG scooters? Right. Forget about haggling. If you don’t want to pay full MSRP sticker, the next guy in line behind you will. So, again, if you’re worried about what’s coming and are considering possible ways to insulate yourself, the time is, indeed, now.

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Eric Peters [send him mail] is an automotive columnist and author of Automotive Atrocities and Road Hogs (2011). Visit his website.

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