On the topic of gas at $3.10, we are currently at historically high prices for this time of year. While speculators might be involved, and demand in the U.S. is down, worldwide demand for oil is at an all time high and there really is no end in sight.
Many of you know I travel to China on a frequent basis. Demand for raw materials, including oil, is growing exponentially in China. For calendar year 2010, they will sell 17.5 million new cars, up from around 15 million last year. Bill Starke would like to know that one dealership in Beijing sold 15,000 cars in November. In fact, the Chinese government is now placing higher tariffs on new vehicles to slow down sales.
As emerging markets continue to mature, more and more pressure will be put on commodities, including oil. The middle classes of China and India are now both larger than that of the U.S. The sheer numbers involved in Asia are stunning.
Interestingly enough, significant efforts to find alternatives for oil are not happening in the "developed" United States, but in the emerging China, with over $1 trillion earmarked for renewable energy research and development. Silicon Valley companies are now partnering with Chinese counterparts instead of the U.S. government, or U.S. investors because they are not only willing, but demanding new energy solutions.
While $3.10 seems expensive, it is only the tip of the iceberg. The price will only go higher.