Oil prices made their biggest single one day gain ever on Friday to almost $139 a barrel up $11 for the day on top of the $5.50 increase on Thursday.
The US government reported the nation’s unemployment rate zoomed to 5.5 percent in May, a monthly rise of half a percentage point, the biggest in 22 years.
One analyst predicted a barrel of crude will hit $150 by the 4th of July.
It was back just six weeks ago on April 23, when we blogged that gas was going to blow past $4 and hit $5 a gallon.
Now in hurricane season, it would only take a threat of a storm, in the gulf to send gas prices to $6.
An storm that hit oil rigs in the gulf or any refineries in Texas, well you would be looking at $8 or more.
This certainly is not just a US problem.
In France, a gallon of gas runs nearly $10.
Turkey, it’s more than $11.
In England last week truckers protested diesel prices over $11.
The price of gas of course effects everything you buy since everything is shipped in from somewhere.
The rise in oil has created across the board increases in food, clothing, all products.
A couple of weeks ago, Dupont which products are used to make thousand of products announced a 20% across the board increase do to price of oil.
And airlines and their passengers, well there just screwed. Remember the big stink a few weeks ago about the guy that had to sit in the rest room on JetBlue? Soon they will be selling that seat. Pay toilets on the plane, you think that’s not coming. The airlines are cutting back flights, retiring planes, firing people, so if you have to catch a flight expect to pay plenty. Less seats, higher costs, not a good mixture for the traveling public.
The world is driving more than ever: There are 887 million vehicles in the world, up from 553 million just 15 years ago, according to London consultancy Global Insight. It estimates the figure will be 1 billion four years from now.
Americans are already driving less, about 11 billion fewer miles in March 2008 than March 2007, a drop of about 4 percent, according to the Schork Report newsletter. It was the first drop in March driving in almost 30 years.
So has the economy fundamentally changed. Or is this just a spike in prices?
we think the change has occurred.
Although oil will fluctuate like any market, demand is going to continue to increase and the lowests we may ever see gas again in our lifetime is $3. More lightly we are going to see $5, $6, and eventually $10.
This is going to further squeeze the lower, and middle class and even some higher earners.
If we get continued increases in costs, inflation, coupled with more unemployment reduced spending, little to no growth in the economy, we get the dreaded stagnation.
So if this is the new world economy, what does it mean for our industry?
The trend of the last 30 years of people moving further out away from the center of town to get more land or a bigger house, will be gone. People will relocate closer into the cities, closer to work, shopping and activities.
People will travel less, working from home will increase dramatically, and the internet will become an increasing source of providing services, social gatherings, entertainment and for the purchase of goods.
Will people who will hardly be able to afford their mortgage payment, gas bill, car payments and food, be spending $100 to take their family to the movies, plus the $10 in gas to get there? No
More time at home, more time on the net, more use of the net. By those who have grown up with it and for those who have nevered used it. And not just in the US but all around the world.
Finally people will come to the realization that their storefront business will have to close and get online to conduct business, as people are not going to get in their car and drive around looking for stuff to buy, and it they do there going to a discount club, Walmart or Target.
All of these businesses that will migrate online will need an Internet presence, starting with a good domain name.
Therefore we see this as the next Internet boom.
Domain names needed for online businesses.
Those we got.
So $6 dollar a gallon of gas may not be such a bad thing if you got the domains.
Michael,
Oil is in a bubble because it is being used as a hedge against the US dollar. It has very little to do with actual supply concerns. Oil moved up $10.75 on Friday because political rhetoric.
However, I agree that owning domains is only going to get better. As things get more expensive, people will turn to the internet as a form of entertainment and to do their shopping.
I love your article towards the ending. lol
I guess thats good news for us domainers, and better news for those with developed e-commerce sites.
Great post – this is good news for domain name owners.
Excellent points.
Trade shows and conferences will also begin to be too expensive for many individuals and smaller businesses to exhibit or to attend. Online tradeshows and virtual conferencing will become mainstream as budgets are cut.
The cost of travel, hotel, meals, conference fees exhibit costs, printing brochures that get tossed, and the shipping costs to get your booth to the destination and back (!) add up to some serious dollars that in many cases might be better spent on your web presence….and domains.
Kelly
I agree more companies are going to do virtual meetings.
It’s not only the airfare, hotel costs have gone up substantially.
It’s also the time it takes to travel.
With Airlines cutting flights back, its going to take longer to get to point A to Point B. The time factor is also going to have to get factored into company travel.
It is true that oil is being depleted and prices will only go up at this point.
It is true that internet use will increase, I hope, for our sake, heh…
I would not, however, say that people will stay in more in the long run. The historic trends indicate that people always seek greater mobility. Higher oil prices only mean that new technologies will be utilized to satisfy our desire for quicker and easier transportation. Alternative energy, teleportation, etc. But I doubt that we will see a long-term “staying at home” trend. This is only a short-term consequence of the oil price spike. People will always love travel and spending time outdoors, IMO, we’ll just have to find better ways to accomodate these desires.
So, to add to your point, buy new tech domains :-). This page should get you started with ideas: http://en.wikipedia.org/wiki/Alternative_energy
Dima
I think your going to see a huge demand for domains as brick and mortar businesses move online, way before you see teleportation.
Respectfully disagree on these unsupportable oil prices remaining anywhere near their current (or going higher still) levels Mike.
Due to changes in people’s energy use patterns, new technologies (solar, plant-based oil, new drilling and new drilling methods, coming Mexican and Russian co-op drilling agreements w/superior technology US oil companies, Canadian tar sands, clean coal, etc), the coming strengthening dollar, the coming increase in clean nuclear energy (longer term), the coming slowdown in the Chinese and Indian economies, and the coming short covering by oil bulls as part of the end of unsupportable speculation in the oil and energy markets, the spike we’ve seen over the last 3+ months will prove; as all similar energy spikes have before this one; to be unsustainable.
This time next year, oil will be under $50/barrel and regular gas at US stations will once again be less than $3/gallon…
…and good domains will still be the best investment on earth.
Doesn’t increased gas costs also have an adverse effect on ecommerce . . . all of this “stuff” bought online instead of at the store now has to be shipped afterall. I can make 1 trip to several stores in my car; while if I order online from several stores, the orders typically end up coming in several different shipments and trucks
Adam
Stuff has to be shipped any way you look at it.
If your buying a book from a bookstore the book has to get shipped to the store.
If you buy online it has to get shipped to you.
Your paying shipping either way.
This is why food costs have risen so much, shipping is included in the price of all goods.
However if you buy online you don’t have to drive to the store to pick it up.
If you buy it online you probably saved the 6-8% sales tax you would pay in person.
If you buy it online you can purchase it by comparing costs sitting in your house and buy from the cheapest vendor.
Advantage to online
Update
Today Sunday June 8th the national average for a gallon of gas in the US reached $4 a gallon for the first time according to AAA.
The national average for regular unleaded rose 1.7 cents to $4.005, according the daily measure on the AAA’s Web site. That surpassed the previous record of $3.989 set Thursday.
Thanks for a very relevant post. Enjoyed reading.
I try to not get caught up in the moment. History tends to repeat itself, as similar economic issues were present in the last 70s and early 80s. By the mid-80s oil prices retreated significantly. Obviously I think domains have a bright future, but I still enjoy getting out of the house even if it costs a little extra.