Real or Unreal
By Brendan Moore
I’m talking to this guy I know the other day, and he allows as to how he is going to buy a Toyota Tundra shortly because he just can’t resist the current incentives Toyota is offering on the truck. He doesn’t need a pickup truck for anything he does on a regular basis, he’s just one of those guys that wants a truck to use like a car. He loves pickup trucks and is unapologetic about his passion. He’s held out on buying one for awhile, and figures that now is the time, that it’s not going to get any better in terms of discounts.
I’m down with all that, even though I tell him that it could indeed get better in the coming months in terms of factory discounts. The market for full-size pickup trucks is not exactly looking rosy this year. In the same vein, I ask him if he calculated the costs of gasoline during his loan period so he could have a total expenditure amount per month, after he adds up his payment, insurance, etc. Because, you know, gas isn’t exactly cheap anymore. Because I remembered that he had said before that he couldn’t lease because he puts too many miles per year on his vehicles.
He says, oh yeah, of course, I did the math and I can afford it easy, just as long as gasoline doesn’t go up to more than $3.50 a gallon this year, and then drops back to around $2.00 a gallon in 2009.
I pause, and ask him, so, how is that going to happen?
And he replies, that everybody knows that gasoline will go back down to something reasonable pretty soon. You know, gas goes up and down, and it’ll go back down again pretty soon. I’m thinking it will be under $2.00 a gallon for a couple of years soon because it’s been up so high the last few years.
I though he was kidding, but then I realized he wasn’t kidding, that he really, truly believed what he was saying. I asked him what he was basing that assumption on, and he just repeated the same rationale. I told him that I just couldn’t see that happening, and further, that I couldn’t envision a scenario anywhere in the foreseeable future where gasoline would be cheap again in the United States. I told him about the ever-increasing demand for oil from countries like China, India, and Russia, our own demand here in the U.S., and the fact that oil is getting more scarce in the world. I said, you know, the economic forces of supply and demand are at work here.
He looked at me with a mixture of pity and condescension, like I was feeble-minded or something. There is plenty of oil, he declared. He said the only reason the price of oil was up was because of a conspiracy among the oil companies and the Arabs to gouge the American public, and as soon as those two entities felt they had gotten away with all the profiteering the American public would withstand, the price of oil would drop like crazy. The price of gasoline would subsequently follow.
He said all this is a tone that suggested that I was really kind of an idiot for not knowing this.
Now, I don’t know this guy well, we’re not pals or anything, but he seems as if he’s possessed of at least average intelligence, and I know he has a college degree and holds a white-collar job at a small IT company that provides technology assistance to companies on a contract basis.
If he believes the situation with gasoline prices now and in the future to be as he described, it begs the question: How many others are basing their vehicle-buying decisions on equally dubious reasoning? I wonder just how many people are counting on the price of gasoline going back to the impossibly low prices of say, ten years ago, or even five years ago.
I remember that in 1999, a price war broke out among the gasoline stations where I lived at the time, and regular unleaded went from the already-low $1.20 a gallon to under a dollar a gallon for a duration of several months.
Is it a reasonable expectation to believe that gasoline will ever be cheap again here in the U.S.? To me, the answer is obvious, and it’s “no”.
But maybe I’m missing something here…
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