Sunday, August 22, 2010

Be Careful Which Car You Buy Next - Oil Price Set to Go Past USD147

Nice car this BMW, yes? If you could afford to buy one, would you get it without a second thought? Well, unless you're super-duper rich, you'd better have second thoughts.

Why? Because of high fuel prices.

If you think you're rich enough to afford high fuel prices, well, wait till the price of oil skyrockets to pre-2008 downturn highs and beyond. Unless you're super-duper rich, you'd likely regret feeling comfortable about current fuel prices.

The International Energy Agency (IEA) is forecasting that world oil demand will set a new record next year when is smashes through 2008’s pre-recession high of about USD147 per barrel, warning that the “era of cheap oil is over.”

Basically, the argument is that, although market volatility may well bring about episodic price collapses, demand for oil will continue to grow each time the world puts in measures to stave off economic collapse. And since the output of non-OPEC countries cannot be increased fast enough to meet this rising demand - deepwater and oil sands cannot be relied on to pick up the slack, despite the media hoopla - the world would have to rely even more heavily on OPEC's spare capacity. If this begins to dwindle by 2013, as the IEA suggests – which OPEC denies – then the world should expect a period of extreme market volatility, soaring prices and, most likely, a marked downturn in the rather fragile global economic recovery.

So, would it be wise for you to invest in fuel guzzling, high-performance cars like BMWs, Mercedeses, Audis, etc or, worse, big and heavy premium SUVs and MPVs? Apparently not. That is to say, no one in his or her right mind should simply want to buy cars without really thinking about what the oil prices would be like in the future.

Yes, you could be rich, but even the rich worry about children's education, retirement, hospital bills, etc. This is why we can see a lot of BMW drivers driving more slowly on highways, obviously to conserve the RON 97 fuel in their tanks - BMWs don't do so well with the cheaper RON 95 fuel and RON 97 is a lot more expensive these days.

For that matter, those who have become rich by working hard for their money should be even more sensitive about the fact that cars give the least amount of returns on investment, due to their high depreciation rate.

So, for most people, this means buying the most fuel efficient car you can afford and, I suspect, they would exclude cars like BMWs, Mercedeses, Audis and the like.

And this is why I don't bother reviewing such cars on my blogsite. Rather, I prefer to concentrate on, to borrow somewhat ironically from BMW's tag-line, "the future of the automobile", which are low-to-mid-range cars that give you far more kilometres per litre than high-range performance cars.

And hey, if you want to experience high performance cars by proxy, you can always turn to motoring shows like Top Gear and Fifth Gear.

Simply put, if you're dreaming of that BMW or VW GTI but feel rather reluctant about sinking your hard earned savings into one, then consider yourself wise. Harder times are coming and the smarter thing to do is to put your money in something that helps you save fuel and maintenance cost.

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