My daughter and I had a conversation about changes that could be wrought by high-priced gas. We wondered if high gas prices were positive or negative. One positive change that could occur is a lighter carbon footprint all around. Carpooling and using scooters instead of SUVs means lower emissions. Plus, it seems that more mobile Americans are drifting to urban environments to be closer to their jobs or to public transportation. But, will this transition last, or do these changes represent quick remedies for a situation that may disappear as quickly as it occurred?

Another benefit from costly gas could be the rush to develop alternative forms of energy. But that's not happening fast enough. My daughter doesn't remember the 1973 - 74 Arab Oil Embargo, as she was born sixteen years after that event. But, I remember the long gas lines and rationing and the 55 MPH speed limit issued by Congress to help this nation conserve gas. Tax credits were offered to those who developed and used alternative sources for energy; but this nation drifted away from the task of developing alternatives to oil as the Arab nations quickly lifted their embargo after a short few agonizing months. Americans once again were in their comfort zone.

The final positive opportunity provided by higher gas prices is the possibility that Americans may begin to lose weight as they cut back on groceries and find alternative means of transportation (like feet). But, when Cora and I researched that option, we discovered that Spam sales have risen by ten percent recently, despite a price hike. This meat by-product still is less expensive than most cuts of regular meat, and many Americans reach for the Spam can as gas prices cut into the grocery budget (which also is on the rise). But, have you read a Spam label lately? There's enough salt and fat in that can to choke a horse. And, although scooter sales are going through the roof, it's a bit more difficult to burn calories on a gasoline-powered bike than on a regular bicycle. Plus, you really need to dig deep to find a scooter that can carry a person who weighs over 250 pounds.

Additionally, if you know your history, you know that people tend to stick to home base when the cost of living rises. Flocking around a TV isn't a way to lose weight, but television sales are up along with sewing notions (time to finish that quilt you started in 1973). Going out to the pub may prove taxing on the wallet, but drinkers won't stop buying alcohol - they'll just drink at home. And, people won't buy into the healthier organic foods, because they're far too expensive compared to frozen options (which often contain as much sodium as Spam).

The worst thing that will happen is that people will sell their stocks, dig into retirement funds and cash out early on CDs and bonds at penalty prices to help make ends meet. This, at a time when investors might think, instead, of shifting priorities in lifestyles and in their investments. Please allow me to explain...

In 2002, the University of Illinois issued a paper that showed the progress of oil depletion in the United States and throughout the world. I'll repeat just the final paragraph of that paper here:

In the arena of public discussion the pessimistic camp on the future of oil production is at a certain disadvantage, as people, particularly during good economic times, cannot fathom that storm clouds may be forming. Furthermore, it is generally more difficult to obtain a sympathetic hearing for a worrisome viewpoint than an optimistic one, as belief in progress, both technological and societal, seems to be universal. This article has nevertheless taken the side of the petroleum geologist and the ecologist that oil depletion will become a serious issue before the end of this decade.

Well, folks - it's 2008, just six years since that paper was written. Those of you who read this paper in 2002 and who believed this research can stop reading now, because I'm about to explain something that you already know. The high price of gas isn't due to speculators (although that' may be part of the issue), and it isn't due to oil companies taking profits (although that may be part of the issue as well). The only reason that speculators and oil companies are doing what they're doing may be because they know that oil resources are depleting. Oil, after all, is not a renewable energy source.

So, the folks who believed the University of Illinois' research may have invested in televisions, beer companies, sewing notions and scooters as soon as the price of oil went north last year. Those folks may now be reaping benefits, because they saw the literal writing on the wall. They may have sold their homes before the housing crunch to move closer to their jobs. They may have even changed jobs, opting instead for employment that was more recession/inflation proof. They may be the only individuals who will retire comfortably and without government assistance, because they don't need to use their monthly input into their retirement plans to fill gas tanks.

This high gas price problem isn't a repeat of the 1973-74 oil embargo, because it will last longer than that previous event (it already has). Plus, the implications aren't the same, as OPEC will increase oil production during this go-round. President Jimmy Carter once called the oil situation in the 70's "the moral equivalent of war," as the embargo affected just about everything in our lives in a negative way. So the current production increase most likely is a reaction to political environments rather than an actual solution to the problem. This may be a costly reaction, because OPEC could reach peak production soon as well.

When Cora and I concluded our conversation, we agreed that BUYandHOLD investors might think about shifting priorities in the light of rising prices across the board. If you need to sell your stocks, then we hope that you're selling merely to put that money into a wiser investment opportunity. It's never too late to think ahead, especially when the writing is on the wall.

Until Later,

Linda Goin