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Car Guide 2006    

$$ and sense

  A look at the finances of autos -- from gas to financing to insurance.
Gas under $2? Don't hold your breath

If you're considering buying a new car, it's not just the price tag you should be considering. How much it costs to run has become equally important.
Have gas prices pretty much peaked? Will they continue to rise? Might they actually go down?

Will American motorists ever again see gas under $2 a gallon?

Over the short term -- don't hold your breath, say experts, pointing to recent history along with current economic and geopolitical conditions. In the long haul, however, it's a definite maybe. 
 
"It took us approximately 100 years to get to $1 a gallon and now in six years, we're seeing $3 gas," says Brad Proctor, founder of GasPriceWatch.com, a Web site that monitors gas prices across the country. "I think that trend is only going to continue."

According to the Energy Information Administration, which compiles energy statistics from the U.S. government, crude oil prices have been rising steadily for several years now.  While gas prices tend to fluctuate, generally peaking during the summer months and trending downward during the winter, the ceiling has been rising each year and "who knows where the ceiling will end," Proctor says. In fact, in the summer of 2006, gas prices are averaging 51 cents higher than last year this time, says the EIA.

The heart of the increase
A number of reasons are given for the rising prices. There is a higher demand for oil throughout the world than in decades past, largely due to the massive growth and industrialization of China. However, oil production has not kept up with the increase in consumption.

The constant instability in the Middle East has led to a shortage of crude oil being produced there. "The number one oil producer of the world is Saudi Arabia," says Mike Pina, a spokesperson for AAA. "Number two is Iraq. As long as there is a war there, Iraq is not producing as much oil as before the war."

Adding to the problem is the fear that turmoil could interrupt the oil production in other countries. "People are concerned about what could happen in Iran, which also produces oil," Pina says. "The Venezuelans don't like us. There are problems in Nigeria, which is also a very large oil producer. So as long as there are problems in these places, the oil speculators will be nervous about the ability of the world to produce the amount of oil that's necessary and hence you're going to see the oil prices going up."

Nations in OPEC (Organization of the Petroleum Exporting Countries) aren't the only ones facing oil shortage concerns.

The refineries in this country's Southeast are still feeling the effects from Hurricane Katrina, which ravaged the Gulf Coast last year. 

-- Posted: Aug. 1, 2006
 
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