Retiring While Oil Prices are Rising

Remember the 1970s?  You personally might have been discoing, but the economy had a heart attack.  Two oil shortages.  Inflation.  Stagflation.  Recession.  Investments took a dive way before the fifteenth round.  Luckily the rise in oil prices were artificial due to political influence, and they settled down to allow us to have two decades of growth and relative prosperity.  We baby boomers have been building for our retirements during a time when the investment future always looked rosy.

Now oil prices are climbing up again and the future is returning to the past.  This time oil prices are rising, blowing through the top of the derrick, and it’s not artificial.  The only way oil prices will ever go down is if demand goes down.  And how likely is that?  A big recession could take a bite out of prices.  Everyone could start driving an electric car and put solar panels on our roofs like Jimmy Carter wanted and demand would go down, but how likely his that?

We constantly hear promises that oil prices will drop to the good ole days of $50 a barrel or less, but it’s not happening.  Remember inflation and how fun those times were?  Our leaders claim there are no gloom and doom shortages of oil.  They’ve been promising things should be stable for decades to come.  Then why is oil over a hundred dollars a barrel?

Our retirement future is based on a steady but reasonable growth that nurtures our savings and investments.    If inflation returns we’ll have less to live off of from our fixed incomes.  As long as oil prices rise we’ll have inflation, and maybe worse.

We can effectively cut the price of oil in half by being twice as efficient or using half as much.  If we had followed the policies set up in the 1970s – yes Jimmy Carter was right – we’d have pushed this current crisis ahead in time two generations.  Instead we bought SUVs and drove them fast and now it’s time to pay for our speeding tickets.

I don’t know about you but I don’t like getting old, besides the growing aches and pains I don’t like uncertainties and becoming dependent.  I want to stay in control.  78 million of us are in the home stretch for the Medicare finish line.  As we all queue up waiting to blast off to heaven we’ll have ten, twenty, thirty and maybe even forty years of living off our fixed incomes, savings and investments.  It now appears that the quality of those years could be directly related to the price of oil.

Is there anything we can do about it?  Maybe.  The price of gasoline has always been unnaturally low to begin with because of government subsidies.  With oil production leveling off and new demand from India and China, it’s really a matter of supply and demand which might be beyond our control.  

It is possible if our society quickly switches to alternative forms of energy that we’ll beat the oil crisis and maybe spur continued economic growth so our investments will grow as we age.  If our leaders drag their feet like they have been doing since the 1970s when the problem was obvious, we’ll see some very bad economic times.  In essence, back in the 1980s we collectively said, let’s party while we have oil and then worry. 

Having a society built on irrational greed hasn’t helped.  The housing market soared off the charts with unrealistic values.  The Bush years of wars and occupations, Katrina and Rita, the housing loan crisis and Republicans spending like Democrats has left a big debt.  In other words, there is no trend to believe we’ll suddenly start acting rationally.

So how do rational individuals plan to retire when oil prices are rising?Can we get AARP to promote energy efficient, conservation and the development of alternative forms of energy?  The issue doesn’t seem to be a major topic in the presidential debates.  Does buying solar panels and an electric car make economic sense during retirement years.  I could retire early, next year after 30 years on the job, but I doubt it’s practical.  I’m thinking I should retire and get another full time job to save money for another ten years before thinking about retirement.  I’d like to retire and write those science fiction novels I’ve always wanted to write, but that won’t be practical now.

And if the cost of living is going to shoot up, where’s the best place to retire?  And do I need to rethink our 401k programs?  Planning for the future seems to have suddenly changed.

Jim

7 thoughts on “Retiring While Oil Prices are Rising”

  1. It certainly is that dependency that is the scariest part. Government certainly hasn’t proven itself worthy caretakers over the past (pick your number) decades. Ugh!

  2. I am ia similar situation as you are, planning to retire in a few years, and watching my savings dwindle while gas prices continue to rise. And, yes, I agree that Jimmy Carter had the right idea but Ronald Reagan’s rhetoric led the entire country astray.

    There would be worse things than my teaching until I expire right in the classroom though!

  3. How high does the gasoline price at the pump have to get before Americans alter their driving habits? At what point do we stop driving across town to eat dinner instead of the place down the street? Will we just keep clicking over our odometers no matter what the price?

  4. Bob, that would be an educational and memorable way to go for your students. I’m also thinking it might be better for me to keep working for a lot of reasons, and not just financial. I’ve been watching those shows on PBS, The Retirement Revolution and I admire those people that keep doing new things as they get older. If I had some guts I’d retire and start a new career.

    Mike, I think the only thing that will change people is higher gasoline prices. Many people think if they protest the government or oil companies will lower pump prices. I suppose a new oil field could be discovered that will change things but it would have to be major. We’ll see if people change when gasoline is $5-7 in the next few years.

    If the price of oil stablizes and the economy readjusts to the new price after a bit of inflation we should do okay. If oil continues to increase in price we’re really in for some bad times unless we change our habits.

    I’m reading a book that was published in 2005 that says if all the various governmental support for gasoline was taken away the real price of gas would be $5-16. In other words the government has a big hand in making us un-conservative when it comes to wasting gasoline. And if you think that the government could have gone in a different direction back in the 1970s, like Carter wanted, we’d be driving vehicles that got 100 mpg.

    This really shows that our leaders are more like followers. People want a SUV lifestyle. Few people want to follow Ed and and his electric cars.

    Jim

  5. I’m not sure I totally agree with the ‘few people want to follow Ed’ comment. Not entirely anyway. I think most people would love the option of owning cars that get really high MPG or don’t run on gas at all. But first those things have to hit a price range and a safety range that the average American can afford them. The cars are either way too expensive or way too tiny to be worth the risk of driving. Even with gas prices what they are it is unfortunately cheaper to buy an old used gas guzzler than to own some hybrid or strictly electric vehicle. Most people don’t have the money to lay out for that kind of investment with the hope of it paying off in gas money savings over the long run. That is the reality of our debt based/credit based society.

  6. I only meant there were few environmentalists who worry about what driving is doing to the country compared to those who just want a big safe car. If I could buy an electric car, hybrid or some other tech that got dramatically better mileage for under $20k I think I would switch now. However, hybrids are very expensive and don’t get that much better milage – not compared to some of the concept cars they are showing off.

    I’d like something about the size of a CR-V or RAV4, that was all electric, radical hybrid or used fuel-cell tech that could get about a 100mpg for $20k. I know that’s dreaming, but I think if such a vehicle existed a lot of them would be sold.

    I also think I could live without air-conditioning if I had to, and a lot of creature comforts if jettisoning helped the environment and saved on gas. I mainly want safe and dependable over fancy.

    I have an 8-year old 6 cylinder Tundra that might get 19mpg on a perfect day under the old reckoning. I don’t know if it’s better to keep it for as long as possible or switch to something more efficient. A newer vehicle would save gas by the month, but how much gas and other resources does it take to make a new car? Am I conserving more by sticking with the old or going with the new? Also, if I traded in my truck someone else would be driving it. I guess I could keep it and only drive it when I had to haul something.

    If everyone used 1/2 the gas they do now would the price of gas come down? Would it avert inflation? Some of these concept cars use 1/4 – 1/6 the gas.

    Actually, we could probably move from SUVs to small high milage existing gas powered cars and cut the demand for gas down to 1/3 – 1/2.

    Jim

  7. “I’d like something about the size of a CR-V or RAV4, that was all electric, radical hybrid or used fuel-cell tech that could get about a 100mpg for $20k. I know that’s dreaming, but I think if such a vehicle existed a lot of them would be sold.”

    I’d be all over that as well James!!! Let me know when you convince someone to do that and you and I can go together to snag ours straight off the production line!

    I keep hoping someone…government, big business, will make the first legitimate move towards a better more environmentally friendly, cheaper and yet safe form of transportation. Its terrible to sit and wish someone would just do the right thing instead of being so absorbed in their own self interests.

    Now I’m dreaming! 🙂

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