As of the day of this writing, the national average price for gasoline is $3.55 per gallon in the US. When gasonline was below $1.00 the prediction was made by this author it would go to $3.00 per gallon. Now we have gasoline priced well over $3.00 per gallon, and I now predict that the price of gas will top $6.00 per gallon in the United States in 2009.



Not much can be done to stop that from happening. To understand why, we need to look at the factors that are the causes of the price rise. There are three: demand, supply, and the value of the currency.

Supply is near or at 100% of capacity. There is only so available. In recent years reductions in daily output have occurred in the United States, Mexico, Russia, Iran, Peru, Argentina, Columbia, Turkey, Australia, Libya, South Africa, Egypt, Spain, France, Algeria, Yeman, Pakistan, and several other countries.

However, not every country has reached peak oil production. Some analysts believe that Saudi Arabia will not reach peak production for a few more years, while others believe Saudi Arabia is at peak already. Regardless of which analyst is correct, Saudi Arabia is getting close to peak oil production. Brazil, Venezuela, and Iraq have yet to reach peak oil output. However, the amount of spare capacity available in countries that have yet to reach peak oil production does not exceed the declines experienced in countries experiencing declining oil production.

While supply remains constant, demand continues to grow at an alarming rate.

In the last 2 years alone, Brazil has raised 20 million of it's population from poverty to middle class. China and India have done ten times that amount. All these new middle class consumers want the lifestyle enhancements typical to the middle class: more meat in their diets, improved homes, and a means of personal transportation for frequent travel. All of those items require more energy.

If supply and demand were not enough to cause energy prices to rise substantially, there is another factor as well: the value of the US dollar.

The world's financial system is ceasing to function properly as a result of the derivatives abuse mixed in with the subprime mortgage crisis. The Federal Reserve has already stated in the recent Bear Stearns situation that these corporations are too huge to fail and will be "rescued". They are too large to collapse because of the derivative contracts that they have created. If one of these huge firms fails, all of their derivative contracts also fail. That would cause a domino effect across the world, and the world's financial structure would instantly freeze up.

The Federal Reserve has no alternative but to continue to bail out investment banks. And the method of "rescue" is to produce money out of nothing and loan it into existence to these corporations. In the past several months alone, over a quarter of a trillion dollars have been produced in bailout money in the United States. This will resume. The result is a constant weaking of the value of the dollar.

When currency is produced out of nothing and injected into an economy, it takes a while for the dilution process to occur. The lag time is usually 5 to 8 months. Therefore, the money that has already been produced in the spring of this year will promote the negative effects to be felt in the fall and winter of this year.

Based upon what is happening right now, $6.00 gasoline in the US in 2009 is better than an even bet. What good is %LINK1% if you cannot afford to supply the gasoline to drive your automobile?