The Prediction of Prices

6/9/2008 9:19:00 AM

It's the most common conversation topic at the moment. It even beats out small talk about the weather. It’s our high gas prices and their insane daily increasing climb. It was just a month ago that the average price per gallon was around $3.45. Weren't those great days? It is less and less of a shock to turn on the news in the morning to find that prices have gone up another three to five cents overnight. As much as we hate to admit it, we all know that soon we will look back fondly on almost four dollars a gallon.

Where will it stop? We hear the predictions of six or even seven dollars per gallon in a year, but we can’t really believe that’s possible. Not really. Something will be done, we exclaim, or someone will come up with a solution before it comes to that. Even as we say this, we know it’s a slim possibility.

There are key indicators that it is going to get a lot darker before the dawn. One scary example is found in a blog by Eric Anderson about old gasoline pumps. What is noteworthy about the pumps is they can only do a price per gallon up to $3.999. There is a backlog of upgrade orders and in the meantime they will be charging by the half-gallon. These old pumps have actually been updated twice before, once in the 80’s and once in 2005. To avoid this in the future, they are updating the pumps with computers that can go up to $9.999 per gallon. So for one part of the Oil and Gas industry, we can see what they expect gas prices will be.

Another unusual indicator of gas prices is… eggs! As Stephen Dubner of the Freakonomics blog points out, the price of a dozen large eggs is linked with the price of gas. Egg prices rise when the cost of feeding chickens goes up. By using more corn and soybean for ethanol, there is less to make feed for chickens and the price rises. When we use more ethanol instead of gasoline, the price per gallon for gas goes up.

So keep an eye on the cold foods section. When you see egg prices rise, fill up your car before gas prices jump as well.

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