Recently published articles by "experts" and blog postings by concerned citizens offer up both scenarios; some suggesting that the world economy will collapse rapidly, while others profess that the US economy will slow more gradually as the price of oil increases.
Political issues in Nigeria and Iran sent oil up again today. Fears that their 5 million barrels a day could be withheld from the markets have spooked traders, which will affect prices at the pumps within a few weeks.
I suspect the next 5 years (and beyond) are going to be economically difficult for Americans. Political posturing by goverments, increasing costs for everything we consume, and continuing conflict in the Middle East as we appropriate their oil will take its economic and emotional toll on us all.
I'm not being a doomsayer. I just feel that we are all looking at a radical shift in the way of life we have become accustomed to over the last century. It's going to hurt.
My objective is to get ahead of the investment curve by looking forward five years. Some of the industries I think are suffer the most (as well as their investors):
- Airlines (expensive fuel will put them out of business)
- Cruise Lines (same as above)
- Automobiles (same as above)
- Air Cargo (same as above)
- Trucking Companies (same as above)
- Consumer Electronics (high energy prices=less disposable income)
- Restaurants (same as above)
- Entertainment (same as above)
- Retailers (same as above)
- Home builders (more costly materials and energy costs will slow home building)
Industries that may not be as affected:
- Oil Companies (those with proven reserves)
- Oil Service Companies
- Railroads (more freight will be shifted to low cost transportation)
- Ocean Freight
And of course:
- Liquor and Cigarettes (people will try to dull the emotional impact of losing their toys)
As far as personal finance, I suggest the following:
- Don't buy too much house too far from the city. Fuel costs getting back and forth to work are going to make the cost advantages of buying comparable property out of town moot.
- Refinance ARMs to fixed rate loans.
- Plan on getting rid of gas guzzlers soon. This includes boats, SUV's, motor homes, and snowmachines. As fuel becomes more expensive, the desirability of these toys will make resale value plunge.
Don't count on our government to be much help - they just can't bring themselves to tell the American people that we are about to face an incredibly difficult challenge. An economic downturn means loss of tax revenue and less services. In reality, what are they going to tell us, anyway? "Sorry folks, your way of life is going to change for the worst? We just couldn't bear to tell you 10 years ago?"