At year-end 2006, a number of knowledgeable people gave us their recipe for continued high oil and gas prices. But how painful are high oil prices? Apparently they have not caused enough pain to diminish energy demand to any large degree-at least not yet. Yes, sales of SUVs and trucks have flattened out, but Toyota's auto sales are going up steadily. We are not driving fewer miles overall, just changing vehicles. Through November 2006, gasoline use in the U.S. was up 1% over 2005. Our GDP is still growing despite paying billions for imported oil. Last year, the Dow Jones Industrial Average reached a five-year high even though oil and gas prices have been at or near levels we once believed would hurt the economy. The new Congress may try to inflict more pain in an effort to reduce oil demand. Talk of carbon taxes in Europe sounds appealing to Democratic ears here. Congress will shift from boosting traditional energy supply with incentives and tax breaks, to encouraging more alternative energy sources The buzz about alternative fuels is getting much louder. At press time, corn was trading at an 11-year high over the hype and hope surrounding ethanol. For more on this, see the January issue of Oil and Gas Investor. For a subscription, call 713-260-6441.
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