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How High Will Gas Go? image

How High Will Gas Go?

Why is gas so expensive?

It used to be you knew prices were rising when you found out about it in the news. Now all you have to do is look at Facebook. Plenty of people are posting pictures of the rising prices at the gas pumps these days. Everybody is feeling the pain at the pump and things probably aren’t going to get better any time soon.

In his recent testimony to the House Financial Services Committee, Fed Chairman Ben Bernanke said, “Higher gasoline prices could lead to temporary higher inflation and reduce consumers’ purchasing power.”

Translation, life is about to be more expensive — again.

Why is gas so expensive?

The question is what’s causing the price of gasoline to rise?

It’s certainly a hot button issue in this year’s election cycle. But as with any election, sound bites win the war, not facts.

For instance, there will be a lot of chatter about the need for increased domestic oil production to help lower gas costs in this election year.

But the facts are that prices are rising despite increased domestic production. As The New York Times reports, “Domestic crude oil production is actually up from 5.4 million barrels a day in 2004 to 5.59 million now; imports have dropped by more than 10 percent in the same period. Despite a temporary slowdown in exploration in the Gulf of Mexico after the BP oil disaster, the number of rigs in American oil fields has quadrupled over three years.”

Why gas prices are really rising

So, what’s really causing the price of gas to rise?

The reality is that factors beyond our control are causing the pain you’re feeling at the pump. Among those factors are increased demand in China and increased instability in the Middle East such as the crackdown in Syria and the showdown between Israel and Iran.

Of biggest concern is the possibility of war between Israel and Iran, with the U.S. also moving back and forth between rhetoric for diplomacy and a readiness to strike. Economists fear that if the conflict escalates to war and oil production is disrupted that the price of gas could soar to over $5 per gallon.

There’s not much any politician in the U.S. can do about that. As The New York Times notes, “A country that consumes more than 20 percent of the world’s oil supply but owns 2 percent of its reserves cannot drill its way out of high prices or dependence on exports from unstable countries.”

Why rising gas prices are good for me

So, what does this mean?

For me, it means that while life is going to get more expensive for most people, I’m going to make more money.

For a number of years, I’ve invested in the oil industry with the belief that prices would rise. As the world demand grows, production is stretched to capacity. Add to that the on-again, off-again disturbances in the Middle East — the world’s greatest reserve of oil —and you have simple supply and demand pressures pushing oil prices up. Until the world discovers a viable energy alternative to oil, the price of oil will rise.

Through my investments in oil, including oil rigs, I’ve also experienced significant tax breaks. Despite what the politicians tell you, they want to reward oil production and encourage it through the tax code. By staying on top of tax code with the help of my tax advisor and author of Tax-Free Wealth, Tom Wheelwright, I’ve added significant tax savings to my investment earnings through oil investments.

Both the ability to understand and capitalize on the national and international trends in oil production and to utilize the tax code to increase my profits requires a high financial IQ. But the investment in my financial education has paid big dividends in this and many other areas of my life.

Where can you profit from financial education?

Am I suggesting that you invest in oil? Not necessarily. That’s an area I’m interested in and profit from. But I’ve been doing it for a long time, starting when prices were much lower. It’s a complicated world and a risky one for those with little-to-no financial education. Things can change fast and money can be lost quickly.

Rather, I’m suggesting that you start paying attention to the world, building your financial education, and applying it in the real world. The only other option is to hide your head in the sand and suffer along with everyone else. Given that, there really isn’t much to lose, is there? So, where can you profit from financial education?

Click here for additional financial education resources.

Leave A Comment jump to leave a comment
Justin
3/7/2012 5:05:38 PM
I recall in one of his books he mentioned that he Invested in Oil Prospecting companies. Due to the tax law at the time, it gave him over 20% Tax Credit/write off from what he put in(I think, don't have the book around). One of the risks though, it was possible for the company to fail and he'll loose the lion's share of his investment. During the early Investment rounds of private companies, there are regulations set in place to keep Average Joe from knowing or being able to invest in it easily. That's why Kiyosaki says to work on Financial Education so that not only would you learn the rules the benefits of the Tax law and other regulations, you would be able to evaluate the company to balance the risks and potential returns.
Massnumbers
Thursday, March 08, 2012
Yep.. Using your corporation to invest in those deals instead of investing as an individual.
ctino
3/11/2012 10:37:43 AM
Oil is a good investment. Just stay away from REEF EXPLORATION, they are a bunch of crooks and thieves!
ctino
3/11/2012 10:37:46 AM
Oil is a good investment. Just stay away from REEF EXPLORATION, they are a bunch of crooks and thieves!
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n8shaw
3/7/2012 9:20:01 AM
You have mentioned investing in oil rigs many times in your writing. I know there is a lot to the subject, but can you provide some resources on how one can get involved in investing in oil rigs? Like you, I see the price of oil going up, up, up over the next few decades, but I have no idea how to get exposure to oil beyond the traditional paper markets, which I am not all that interested in. Thanks.
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Wednesday, March 07, 2012
Just wondering... why don't they invest to the infrastructure of producing bio-fuels instead of financing wars? Hemp, palm fruits, coconuts, corn, sugar cane, used restaurant oils, etc are said to be viable energy alternatives to oil... ---------------------- http://bit.ly/aimsgopp
Goldfinger- The Preferred Craigslist Gold Buyer
Wednesday, March 07, 2012
Robert, I am a long-time follower of your work. You mention in the article that America consumes 20% of the world's oil supply but only owns 2% of the world's reserves, but this is very misleading. We have larger untapped oil fields in the United States than the entire Middle East. Big Oil is the biggest global conspiracy in the past 50yrs. If we wanted to produce gasoline in this country that came from our own oil, we could, and we could sell it for $1.00/gal and still be very prosperous doing it. If Ron Paul were elected and got rid of the EPA and DOE, this would be not only possible, but probable. And it would be good for everyone in our country to keep our money here! Jeremy H Goldfinger Kansas City, MO
007
Wednesday, March 07, 2012
The reason why we don't produce from our on soil has a lot to do with the petro dollar. in the early 1970's we told them we would build there oil fields and buy all their oil and in return they have to buy our debt
Team Honeywell
3/8/2012 1:07:02 AM
I have pre-ordered Tomm's book so that I can find similar ways to profit from the tax laws. Look forward to keeping more of my cashflow.
ByteCarp
3/8/2012 9:59:30 AM
There is an element that is consistently left out of the oil pricing argument, which is REFINING. The less REFINING into gasoline, the LESS available gasoline. This has NOTHING to do with problems in the mideast, drilling, etc., but a great deal to do with the rising PRICE (along with taxes, etc.). This is also one reason for higher exporting FROM the US (in addition to increased consmption by developing countries). While I'm all for blaming big oil, etc., having all of the facts makes for a more complete argument...
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