Really Cheap Gasoline Could be a Boon to Vacation Travel
Sept. 22, 2006. Really cheap oil prices could be an off-season boon for luxury vacation rentals as well as the rest of the travel industry. A prediction that we published in our Aug, 31 blog---that gasoline pieces would be closer to $2.00 than $3.00 by Thanksgiving—has already come true two months before Thanksgiving
Today oil prices closed at $60.31 per barrel, the fourth straight week that oil prices have declined. Amaranth Advisers, a giant hedge fund, has announced that it has ceased energy trading after having lost $6 billion over the past month in speculating on natural gas. We believe we will see more energy speculators head for the exits as the market loses of a lot of the uncertainly about oil supplies—estimated to account for about $20 per barrel in risk premium.
We are not energy analysts, but we find an article by Christopher Helman in Forbes.com to be very instructive. He quotes oil industry analyst and gadfly Michael Lynch, who says that oil will fall to $45 per barrel by mid-2007 and you are going to see gas at $1.95 per gallon sometime next year. With scattered reports of gas already selling at $1.99 per gallon on special promotions at a few locations around the country, we believe that many people may see $2.00 gas by the end of this year.
We don’t know if Lynch’s projections for the longer term, such as the possibility that oil could dip briefly into the $20 per barrel range in 2008, are correct. However, we are seeing his projections for the short term take place even faster than he had projected when the Forbes article was written. His explanation of the global supply and demand factors driving oil prices are the most logical we have seen. Anyone with an interest in the travel industry would do well to read it carefully.
