Why gas prices don’t scare me

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The price of oil is very high right now. The price of gasoline is even higher than oil and it is beginning to really hurt middle class Americans, Canadians and others from around the advanced world. People are beginning to complain and looking for ways to conserve or cut their gas expenses. One major way that people are just now beginning to think about is buying a smaller, more fuel efficient vehicle. Well, I have a different outlook on the price of gas and it leads me to not worry about it as much as everyone else.

Although the current price of gas bothers me as much as anyone else, I don’t think it is doomed to only get worse like everyone is saying. The talking heads on TV are all saying that these high gas prices are here to stay and will only go up due to rising demand from India and China. I say that more of this price spike has to do with the Arab revolts in the Middle East which is prompting fear trades and speculation to raise the price of oil. This is not the real value of the commodity and in due time it will correct itself. Sure, India and China are demanding more oil and this trend will only pick up, but that doesn’t mean we have a shortage of oil supply out there.

Saudi Arabia does not operate at full capacity in terms of pumping oil. They have the world’s largest oil reserves and they haven’t felt the need yet to maximize drilling for the black gold. Make no mistake, the Saudis know that they need oil to be less expensive than it is today. You may think they like really high prices because that’s just more money for them. This is true in the short term, but Saudi Arabia knows very well that if the world, particularly the United States feel gas is too high to manage, they will invest untold money in order to change their dependence on oil imports. This can actually happen, but it takes really high oil prices for a long time to make this type of investment feasible. If this happens then Saudi Arabia might find themselves without enough customers for their only real export.

Saudi Arabia has already announced plans to increase production and can get to a point where their production is almost twice as much as it is today. This, along with the potential of the U.S. drilling for oil more than today (they are also nowhere near their full drilling potential), is enough to allow me to not be overly worried about the future of gas prices. I am not looking at tiny, golf ball sized cars that leave you praying not to hit a normal sized car for fear of being punted like a football just to save on gas. Everyone should look at these facts and calm down a little.