Did We Say $5 Gas? Try $7. So Much for Ford, GM, and Consumer Spending

At near $4/gallon gas, the United States is finally reaching the point where automobile usage is actually slowing. What will happen when gas is $7/gallon? (In the NYT, Jad Mouawad gently slips this last line into a story about how gas prices are expected to peak over $4 in June: “Analysts’ forecasts for the price of gasoline over the next few years run as high as $7 a gallon.”)

Three likely ramifications:

  • More pressure on US car makers, which, as usual, have been caught with their pants down (So much for that insatiable SUV demand)
  • More opportunities for alternative energy investments like First Solar (FSLR) to continue to succeed. (We wouldn’t bet against the Al Gore and Kleiner Perkins partnership right now.)
  • Continued pressure on consumer wallets, which will likely hammer discretionary spending.

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