I find accounting a very interesting discipline. It quickly allows you to gather the facts, both past and present, and maybe if you are lucky, look ahead.
Make a little plan. If the world folds in…well, maybe you can figure out the rate of collapse. Have a little budget to guide you along the uncharted path.
My mother worked around hospitals all her life. She was one of the U.S. Army officers in charge of field hospitals in New Guinea during World War II. She absolutely hated budgets. “Worthless.” Then again she was ready to spin on a dime and make whatever assets she had work. No choice…wounded arriving. Numbers got in the way. They just did not carry any consequence when facing immediate needs. Even after the war, she had the grace of a southern girl, but just hated following the numbers. “Budgets are always wrong,” she would say.
So, when the CFO of the ubiquitous delivery company with thousands of those dark brown trucks says his biggest financial gamble for the future is the cost of fuel…it gives me pause. Not elections. Not consumer spending. Not wages. Not pensions. Not health care. Not weather. Not competition. Gas prices.
Maybe old mom was right.
How do you budget for the future cost of fuel these days? Logically, to support our own “oil patch” the cost of crude needs to be above $40 a barrel. But the House of Saud is pumping flat out to keep their market share and they can make money all the way down to $10. A very slippery game of chicken.
Oil sands? Well, rigs are now parked like neatly stacked cord wood waiting for a change in price. Keep all those empty “Man Camps” ready—but for the most part them boys are fishin’ this summer. The previous oil rush pendulum now swivels in favor of an abundance of over-qualified job applicants to build mild or spicy burritos at the local Taco Bell.
“B U S T” was brightly illuminated to the common man as trading in crude oil futures briefly touched $26 a barrel. Over supply is finally recognized. Now the stock market turns down when the price drifts under $40 and rallies when it hits $50. Wow. All those economic theories now add up to counter-intuitive market moves.
Gasoline prices this summer can be between $2 and $3 a gallon for regular depending on which state is taxing you–and it appears that these prices are somewhat stable and might be here to stay for the immediate future!
And, Fiat Chrysler of America has decided to get rid of their last two American made small CARS. With gas so cheap everyone wants larger vehicles.
The public wants to “un-car” like never before. So the Dart and the 200 will make way for more profitable truck production. Chrysler will no longer be in the small car business. Leave that to Fiat. Lucky them.
Let’s step back for a moment and take this all in. 2016 will be the biggest sales year in the history of the automobile business. We have relatively cheap gas.
Plenty of oil. Financing available. Plenty of well-made new and used vehicles available like never before.
Cheap, small cars are OUT, while there are waiting lists for $90,000 Cadillac Escalades. Manufacturers are struggling to ADD options and push prices up. At the same time there is enough cash-on-the-hood incentive rebates that now manufacturers’ profits are starting to erode. And, the average life of a used vehicle in service has increased to 11 years.
I’d like to see a spread sheet on THIS mess. The market is speaking to all of us with many tongues. Leave out a decimal point and Big Data will have you believing something completely backwards. Like men’s cargo shorts are now suddenly out of fashion. HA! As if. Must I now roam cargo-less?
Seems to me the win-win-win here is to continue to bet on modest sized vehicles that make great mileage, keep them for a good long time and pocket the fuel savings while you can. Money you might need to spend on a new pair of short trousers.