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So, You Think Gas Prices Are High Now?

It's certainly causing a lot of us to do a double take. I mean, if you were told just a couple of years ago that you'd be paying over four dollars a gallon for gas, you'd had laughed. But no one is laughing anymore.

So, the four-dollar a gallon question is: how long will gas prices stay this high? The good news is not much longer. The bad news is that's because they are going to go even higher. And I'm not even close to kidding.

The misunderstanding about gas prices never ceases to amaze me. And that's because the price at the pump has nothing to do with anything other than what a bunch of guys on a trading floor in New York City think the price should be.  Simple put, oil is a commodity. No different from coffee, frozen concentrated orange juice or gold. The price is a direct reflection of that old formula we  learned in ninth grade economics class:  supply and demand.

What's happening now is that investors (traders) are guessing that worldwide demand for oil over the next few months will far exceed available supply. And that's because investors are nervous about unrest in the Middle East and the possible effect that unrest COULD have on oil supply.

So what's the bottom line? Well the news isn't good. Because even if oil supplies continue uninterrupted from the Middle East despite the ongoing crisis there, demand is expected to remain exceedingly high due to growth in China, India and even Africa. And that means that what we are seeing may, in fact, become our new norm. Simply put, while pump prices may retreat a bit over the next year, my personal opinion is that they will never again fall below $3.00 a gallon.

Ouch.

Next week I'll answer the question now on everyone's mind: should you buy a hybrid to replace the gas guzzler in your driveway? My answer may absolutely surprise you. Stay tuned.

 Doug "The Car Czar" Brauner is the owner/operator of The Car Czar Auto Repair in Sacramento and Citrus Heights.

For more information on having Doug work on your car, please visit www.thecarczar.com

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