It seems no matter where you turn, the downturn of the global economy has been blamed on the collapse of the credit and real estate markets. Certainly lending did get out of hand and homes were used as ATM's for far too long. However, the link to gas prices and the collapse of the financial markets is rarely discussed.
Prior to Hurricane Katrina in the fall of 2005, the supply of gas suddenly diminished. Naturally, unrest in the Middle East and two wars were real causes for concern. Any wrinkle in the delivery and shipping of oil has a near immediate cause and effect reaction on the cost of crude oil. We can all remember the painful images and stories from the devastation of the Category 5 hurricane. In the midst of that tragedy, the entire world would soon see the price of gas and heating oil begin an up and sometimes down roller coaster for the next 3 years.
Lets face it, all markets are run by supply and demand. Whether it is a stock, commodity or real estate, prices are dependent on demand. While credit was easy to obtain and real estate prices seemed to have no ceiling, nothing stays the same forever. Once the concern turned to basic needs like being able to afford to drive to work, the flow of money slowed. Sure there were congressional meetings with CEO's being grilled, questions of speculation in oil but lets face it the reward of investing in real estate was now purely risk! Buyers and investors of homes fled.
While the cost of gas is now hovering at approximately $2 per gallon or roughly half of where it recently was, it is no longer in the headlines. In fact, the cost of gas is barely news-worthy. However, in the back of almost every consumers mind is the financial pain we all experienced over a three year time period and most feel that $2 gas is a temporary reprieve. It is only logical that big expenditures are now put. Is there a fix no, but a nice honest explanation of what happened and a realistic assessment of where prices are heading would certainly help people budget for their future.
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