Sunday, May 14, 2006

Paying Through the Nozzle

About a week ago, I was feeling pretty good. Spring had (finally) decided to arrive in the Northeast, my eldest daughter had (finally) decided on a college (and that college – her top choice - had awarded her a VERY generous academic scholarship), and the markets had been performing so well I was actually looking forward to the arrival of my 401(k) statement. I had driven home from work with the windows down, the sunroof open, and the car stereo playing at volumes destined to make me prematurely deaf.

At the height of this euphoric emotional peak, I pulled into my “favorite” gas station (the one that is nearly always at least a nickel/gallon cheaper than the ones in my neighborhood), and proceeded to fill the tank.

If you’ve filled your gas tank in the past six weeks, you know where this is going. Let’s just say you no longer have to be driving a Hummer to be looking at a $50 fill-up.

Now, I’ve heard (and accepted) most of the rationalizations around the relatively irrational (IMHO) run-up in the price of gasoline. I realize it’s still cheaper by volume than milk, or that fancy bottled water that some people insist is different than what comes out of the tap. I know that, adjusted for inflation, gasoline is not all that much more expensive than it was decades ago. I understand that the Chinese finally have an economy that must be fueled, that we haven’t built a new refinery in more than a decade, that last season’s hurricanes took a toll on our capacity, that refusing to drill for new sources in far-flung places has a price, and that our national reliance on petroleum from other nations (particularly those in volatile areas) renders us vulnerable to these kinds of vicissitudes.

I appreciate that higher prices may ultimately help us break our national addiction to imported oil. I’ll also concede that the forces of supply and demand don’t always, in the short-term anyway, provide a very satisfying result – and that government-imposed price controls have never worked (though politicians who protest that these forces are beyond their control might take a look at those controllable, government-imposed taxes at the pump). However, I’ll also say, for the record, that I think most of this is the result of some commodity trader out there somewhere getting rich at my expense.

Whatever the cause(s), the sad reality is that, if I am going to drive these days, I have to pay a lot more than I did a year ago. That’s exactly the kind of unanticipated surge in expenses that needs to be part of any well-crafted retirement savings planning, of course. Sure, when I’m retired, maybe I could just decide to drive less - - - but those kinds of cost increases quickly wind their way through the price of just about everything we buy, including food (which has to be transported, after all). Moreover, there are physical limits on how low one can safely set the thermostat come winter (or how high, come the onslaught of summer’s heat).

Ultimately, what the recent surge in gasoline prices reminds us about an uncertain future is just that – and why the need to save for an uncertain future is sometimes the only certainty we have.

- Nevin Adams editors@plansponsor.com

p.s. you might want to check out http://www.gasbuddy.com/

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