RVers could see fuel at $8 a gallon in 2009

Next year RVers will be saying, "Remember when fuel was only $4 a gallon?" RV Now was well ahead of others in telling you diesel prices would shoot above $4 a gallon, but let's hope I'm way off in my current analysis.

My starting point is the question of why are Europeans currently paying fuel prices of $8 per gallon while we are around $4? The answer is not as simple or straightforward as you might think. Yes, they do have high fuel taxes (so do we) and they rely almost exclusively on imported oil. But this does not completely account for the prices they pay compared to us. So, if you're feeling badly about your fuel costs just think about how much your European neighbors across the pond are forking out. Some RVers have developed a fuel defense mechanism like my friend and fellow RVer Harley Mason who makes it a point to refuel his motorhome when the fuel gauge reads one-half empty because he can't stand the pain of paying for a full tank.

SO WHY DO I THINK we'll soon be paying $6 to $8 a gallon? There are four major reasons fuel prices will go through the gas station awning this year. First is the 40 percent devaluation of the U.S. dollar this last year. When your dollar does not buy as much oil on the international market as it did the year before the price at the pump in the U.S.A. will increase. The U.S. economy is in trouble and the dollar will continue to decline until we see a recovery. The bottom line is a declining dollar means an increasing price at the pump.

The second reason for fuel price increases is a trend forecast. Today the price of crude oil is around $130 dollars a barrel. This represents a price up-trend of 96 percent for a 12 month period and a 165 percent up-trend for the past three years. The math is simple, if a gallon of fuel costs $4 dollars today and it goes up 96 percent a year, what will it be next year at this time? The result will be around $8 a gallon.

The third reason is the increasing demand for oil in emerging economies. China, India, and other countries are increasing their appetite for oil at an exponential rate. When more people come to the table for a bigger piece of the pie, the price of pie goes up.

The forth reason is the slowing production of current oil fields and the higher expenses of extraction of oil from declining fields. Basic economics tells us that if it costs more to produce a product, no matter what it is, the price goes up.

Finally, many people smarter than me, actually looking at the raw oil field data, are predicting a price increase of $150 to $200 dollars a barrel this year. What does this mean for RVers? It means you need to double your fuel budget. If you do this now it won't hurt as much when the time comes. If I'm wrong (and hopefully I am) you'll have more money to spend on something else. So you'll be ahead of the game either way.

Looking for more ways to pump fun into RVing - Jim Twamley, Professor of RVing.