Think Your Way to Wealth is noticing the same thing that I've noticed: Gas prices are sneaking back up. For a while they were down in the low-$2 range here (yeah that qualifies for low now) and now they're testing $3 again. “RC” caught that the former president of Shell Oil, John Hofmeister, predicts $5 gas by 2012 as demand picks back up.
RC attributes the lower prices of late 2008, early 2009 to the recession — which I do, too. But we're entering uncharted territory, and possibly driving and thriving on borrowed time. We've far outpaced geology's production in our consumption for many decades, and the past few years we've never consumed it more quickly. The worldwide peak of oil production is at hand, if it hasn't already passed. After that, a permanent decline, meaning a permanently decreasing supply of freshly extracted oil per day.
So, is the recent increase in price due to increasing demand (as in we're getting out of the recession) or due to decreasing supply (as in we're starting the down slope of the production curve)? Right now it's a bit hard to tell: 2009 production was lower than 2008, and the recovery, if you can call it that, is a tad shaky at best.
But it's hard (though not impossible) to argue that the trend for the price of oil is up as it gets harder to find, and shorter in supply. Whether $5 gas comes in 2012, or this year, or 2015, or even later, it will arrive and we will need to adjust to the added cost somehow. I doubt many people (except for the Lorax, maybe) are looking forward to paying more for gas, since it's nothing but a tax on the way many of us live: commuting, traveling, and then traveling and commuting. 🙂 Actually, that's just the tip of the iceberg: there are lots and lots of products that are derived from oil, and they'll all get more expensive. Even Congress couldn't be this comprehensive with a tax. (Though I'd be foolish to tempt them, wouldn't I? 🙂 )
Bottom line, high gas prices are coming. If you're not in a position to pretend that you're paying $15 for gas now, why not pretend that you're paying $5 for gas now? If you put 20 gallons of gas in your truck and pay $60 for the gas ($3 per gallon), pretend like you paid $100 for that fill-up and sock away the $40. Then adjust things around that new constraint. There! You've made the transition to $5 gas. Now what about $6 gas? Do the same thing. And so on.
This is the proactive way to deal with rising gas prices. Far better to adjust early than scramble in reaction.