Paying at the Pump... Big Time by Manny Backus

[First Hour Trading]

Paying at the Pump... Big Time
by Manny Backus

I was driving home yesterday when I got so distracted I nearly ran a red light. What caught my eye? The prices at my local gas station. They must be at an all-time high. I went online, and did a little research. Measured in today's dollars, we have not quite met the peak gas prices of March 1981 (that was the start of the Iraq-Iran war). But it's very close.

It doesn't help that I live in California. We're neck-in-neck with Alaska for the highest gas prices in the nation. The lowest are in New Jersey and Missouri. If you want to see how your area compares, check out the interactive map at GasBuddy.com. If it seems to you that prices shoot up fast but come down slowly, you're right.

Why are gas prices so high? It's Economics 101, a simple case of supply and demand. The OPEC nations haven't expanded their production capacity much since 1979. (What are they doing with all the money they rake in - building ski slopes in the desert?) Meanwhile, the worldwide appetite for gas is skyrocketing. (Thank you, China and India!) And it doesn't help our prices that the dollar is so weak.

What happened to our domestic production? Some of you may remember the gas shortages of the mid 1970's. That's when our government imposed price controls on domestically produced oil. Although that did help consumers at the time, we're paying the price now because it limited U.S. exploration and production. The gas companies said why invest big bucks to find new oil if we are limited in the price we can sell it for. And believe it or not, we're still recovering from the impact of the 2005 hurricanes on oil production in our gulf states.

So what can we do to soften the blow dealt by high gas prices? I guess we could all buy a hybrid car, but just keeping your old car in shape (checking the air pressure in the tires and changing the oil and filters) also helps your mileage. Drive sensibly (no "jack-rabbit starts"), drive less (consolidate trips), or how about working from home? Commuting puts more miles on your car than anything else. As you know, I work from home as a day trader. You'd be surprised how long one tank of gas will last me. One final note to make you feel better - today gas hit $8.50 a gallon in Germany.

All the best,

Manny Backus
First Hour Trading

P.S. It's these gloom and doom times, laden with huge trading swings and stunning volatility in the markets, that make for ideal active day trading opportunities. Join us for trading tomorrow morning at First Hour Trading