I just filled up my SUV. I paid under $2.40 a gallon. Not too long ago, I was paying over $4.00. I’m spending about $30 less per fill up than I was a few months ago. This is great for consumers. What are you doing with the extra cash you have due to the drop in gasoline prices?

Most of you would probably answer that questions with “I don’t know”. Well, it’s time to make a plan, because you never know, these cheap gas prices (relatively speaking of course) might and probably won’t last forever. It’s time to manage your money and your expenses with a higher level of scrutiny. I encourage you to read on.

A Natural Stimulus

There is a ton of talk surrounding our government doing another stimulus package to “boost” the economy and consumer spending. As I mentioned in a previous article what I thought about another stimulus package, I think it is a joke. Our government spending is completely out of hand. Why not simply embrace the natural stimulus of lower fuel costs that impacts just about everybody?

Why not encourage consumers to save the money that they don’t have to put towards fuel anymore. We have to get people saving money again. That is more important than a consumer-led recession in my opinion, especially over the long haul. Right now, our leaders would rather have short term consumer spending higher and you further in debt, than have a recession that leads to higher savings rates.

Gas Prices Down The Road

I’m in the camp that says gas prices in a year or 2 or 3 will be much higher than they are now. What are you doing to prepare for such a scenario? I’d recommend you put away some money that you aren’t spending on gas now in a “gas emergency fund” so that you can have a stash of money ready in case you need it just to get around town. If I’m wrong about future prices, well, you will have a stash of money left over that can be used for other things or other investments.

If you’re an investor, you may consider buying into some oil and gas investment vehicles. One of my favorites is The Oil & Gas ETF (DIG). I currently have a position and will probably buy more if prices deteriorate further.

The reality is that even in a worldwide recession, the projected demand is higher in 2008 than in 2007. Also, even with the projected slowdown in demand, it is still projected to be higher in 2009 than in 2008. Demand for oil worldwide is still growing. What happens when the economy rebounds and consumption increases? Also, due to lower oil prices, many producers have shut down some production which will lead to a short term supply drop which could also push prices higher.

The bottom line is that I believe fundamentals indicate we are due for higher oil prices. I think it is a good investment especially at current levels. You might get some short term moves down, but long term it is a great investment.  A factor I didn’t even address is the U.S. dollar.  Many credible people believe the dollar is due for continued decline over the coming years due to the irresponsible fiscal policy and government spending of our country.  A weaker dollar is also a catalyst for higher oil prices.  While these fundamentals that support higher oil prices may or may not be 100% accurate, the question shouldn’t be what if I’m wrong, but rather, what if I’m right?  Will you be prepared?

Oil & Gas: A Huge Part Of Your Life

To conclude, oil and gas prices impact you probably more than you think. Not only is it one of your biggest expenses, so it impacts your personal finances, it also impacts the prices of just about everything you buy. High fuel costs is one of the biggest impacts to our economy. You need to prepare for higher energy prices whether they happen or not. You should be saving and putting extra money aside for potentially much higher gas expenses or maybe even investing in a position which will outperform with higher oil prices.

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