No. of Recommendations: 2
How about the gas prices going forward, we are already approaching $100 and its not even spring yet. I always thought that higher gas prices will hurt the overall market specially an auto sector.

Some so called experts are predicting $200 a barrel by next year.


Wow.

The price per barrel was $109.41 on Wednesday's close (the last price my data source has) -- that's the Brent price. That's up 17% since the end of 2010 and up 12% in the last month. I think that reflects uncertainty of oil reliably coming out of the Middle East thanks to the political turmoil over there. Libya is a huge oil producer and turmoil there, especially with people evacuating, is bound to increase the price because of the possibility (or reality) of shutting down.

I think a more sustainable level is in the $80s or $90s range, but you know how the market loves uncertainty.

Higher gas prices could actually help automakers. Older cars are less fuel efficient, so high gas prices provide motivation to trade up. The transition to hybrid or all-electric vehicles is really gaining traction, too, and is helped along by high gasoline prices.

Finally, don't underestimate the power of pent up demand. Peter Lynch called this out in One Up on Wall Street (if I recall correctly). We've gone through a bad recession, people have had to drive their older cars for longer than desired, etc. Yes, the cash for clunkers thing pulled a lot of revenue forward, but I don't think it extinguished all of the pent up demand.

Cheers,
Jim
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