Monday, January 7, 2008

The real cost of oil remains to be seen

The price of crude oil surpassing $100 per barrel has broken a major psychological barrier, and some oil traders believe the price will only go up from there.

Hundred-dollar oil is a hurdle few of us were thinking about a few years ago, but the weary world jumped over it on the second day of January and somehow landed on its feet.

Some traders in oil futures believe that crude could hit $200 per barrel in a year or so.

Perhaps we’ll learn more about ourselves and our thresholds in the near future should the trend continue upward. If the predictions are true, the toughest tests are yet to come.

A few decades from now, when historians look back at 2008 they might point to our short-sightedness about the $100 and $200 hurdles. Someone might even laugh at how we thought $100 oil was expensive.

But no one is laughing at the present time except for the people profiting from oil.

That old cliche, “If you bought it, a truck brought it,” is likely to have more significance for the average consumer in the years to come because the cost of business has to be passed along in some form.

Hypothetically, when a loaf of white bread hits $7 and we pay a $25 fuel surcharge to hire a plumber, analysts will be able to say that oil prices played a part.

We all hope we don’t end up in a breadline somewhere, but it is not reassuring to know that in January 1999 – nine short years ago – the average price for a barrel of oil was $12 and a loaf of white bread was 87 cents.

Maybe the price of oil is supposed to skyrocket out of reach until we as a society are forced to incorporate alternative forms of energy into our daily routines. But how much is that going to cost?