Some analysts have forecast that gas prices could hit $7 a gallon. That’s up from recent averages in the mid $3 range. How might that impact markets, and investments?
Even before the Russia and Ukraine situation, gas prices were the highest they had been in years. In fact, even back in 2021, some places in California were already experiencing gas prices of nearly $8 a gallon.
Trading Economics forecasts gas prices to nose dive by the end of March 2022, hitting just $2.65 a gallon, and $2.44 by the end of the year. We currently appear to be heading in the opposite direction though, with little obvious logic to believe they should dive that soon.
It seems more possible they could double from here.
The most obvious outcome of higher gas prices is compounding recent historic inflation. If gas prices have been a part of the logic in recent inflation, then just multiply that to estimate where things could go.
We’re talking about nearly 100% on gas. On top of 50% increases or more last year.
Considering gas is still used for just about everything, from manufacturing and moving raw materials, to getting product to warehouses and retail outlets, to customer delivery, expect this to show up in prices across the board.
This is in addition to inflation on just about everything else that businesses have to cover.
Supply Chain Issues
Gas shortages or a lag in delivery would also compound supply chain issues. Or at least be another excuse for the prices. Not that this is going to happen, but it is possible.
If there are any attempts at freezing prices to combat this as we’ve seen in other countries, often leads to companies sitting on product because they don’t want to sell it on such thin margins.
How To Invest
It is worth noting that according to the US Energy Information Administration gas prices were higher than now in July 2008. Just a few months later it plummeted, along with the collapse of Lehman Brothers and many others.
Public stocks and crypto are already in a very precarious space. Real estate and secured debt investments definitely stand out, and are drawing intelligent investors.
Most obviously, increased inflation will drive up the cost of new homes and housing even further. That will benefit existing home and apartment prices.
Major renovations and flips could take longer. Some are trending toward more cosmetic rehab and wholesale strategies to minimize exposure to unknowns.
Should gas, or inflation in general continue, it is going to eventually push many to their financial limits. Many have been skating by using credit, but that will run out if they can’t balance their income and expenses.
This will only benefit investors holding affordable range rentals and short term rentals. The demand for these units will only grow no matter which direction the economy goes.
Liquidity is going to be a big factor ahead, with those that have it being able to seize on well priced opportunities. While relationships, especially with contractors, suppliers, and vendors will make or break those in the real estate space.
Find out more about investing in secured debt and real estate, go to NNG Capital Fund