How to handle an oil price shock

We’re in the middle of a oil price shock. We may have been here before, but that doesn’t make the anxiety any less real.

Welcome back to war, folks. Why are we at war, you ask? I don’t know, but The Atlantic has come up with 10 different reasons, all of which are contradictory.

Occam’s Razor tells me that the people in power thought it would be cool, would make them look strong, and would probably make them money as well.

This is what I call the “Grand Theft Auto” foreign policy at work.

Now, I’m not a fan of the Iranian leadership either. But haven’t we learned from history that superior fire power does not necessarily lead to things going your way? Anyone remember Vietnam? Afghanistan? Russia and Ukraine??

But hey, at least we lowered the price eggs, right? Okay, I’ll stop making that joke. At least we’re reining in our spending?

Anyway, the practical upshot for most of us is that the price of oil is up, which means the price of gas is up, which means that the price of everything is likely to go up soon.

So what do we do?

The statistics so far

Here is a chart showing the price of oil. See if you can figure out when the war began:

Now here’s the price of a gallon of gas. (Same question as above.)

Now, only about 30% of the world’s oil comes from the area where the war is taking place, so it’s not the majority. But any kind of volatility in the availability of oil is going to send markets panicking.

Transportation costs are going to rise because of this too, which means higher cost of airfire, as well as shipping, which you know we like to do.

But not only that, the war is affecting the shipments of materials used in fertilizer. And as fertilizer is used in food, we can expect that the cost of food is going to rise too.

So basically, the cost of pretty much everything is about to get a lot more expensive. It’s less of an oil price shock, and more of an “everything shock”.

This just keeps getting better, doesn’t it?

Don’t make any big moves

We’re in for a large period of volatility. We don’t know what’s going to happen next week, much less six months from now. That makes it very hard to plan things.

So I wouldn’t make any big financial moves, if you can avoid it.

This means, no car buying (not even an EV), no home buying, and certainly no selling of investments (or rebalancing). Uncertainty in the market will make things more expensive and uncertain, and you will almost certainly be on the losing end of this if you react to the short-term.

Anyone who remembers the pandemic recalls how the stock market was in freefall in April 2020, only to bounce back higher than ever within a few months. If you panicked, you lost.

Buy that flight

About the only contrary advice I’d give about (kind of) big moves is that if you have summer air travel coming up, you might want to book the flights now. This is generally good advice anyway, but flight prices tend to lag energy prices (since airlines buy gas contracts in advance) so it’s likely that the big swings in price haven’t happened yet.

But even still, I’d expect an expensive summer of travel. Time to get a Costco membership and book your rental car there.

Transportation

Since gas is going to get more expensive, it might pay to shop around. Again, Costco has the best prices on gas in most areas, so another reason to get a membership. (Though it’s not worth it to get gas at Costco if you have to drive too far; the gas usage will neutralize the savings.)

There are also the other basic car best practices you can remind yourself of too:

• Keep your tires properly inflated
• Combine trips more efficiently
• Don’t drive like a maniac

And, as long as I’m at it, I might as well add that public transportation may be an option. While transit may be in a death spiral due to the pandemic and remote work, they aren’t going to raise prices quickly in response to world events. So it’s going to be a really good deal, assuming it works for you.

Get intentional with your money

It also would be helpful for you to get a better handle on your finances. Learn what you’re spending your money on, and get intentional about it. Even just tracking your expenses can help you save money, even if you’re not trying to do anything differently.

I know I say this all the time, but it never stops being true: by keeping track of where your money is going, you will have more of it. And every little bit counts right now.

Don’t panic

I also say this all the time too, but it also never stops being true: Don’t panic.

Now is not the time to become a prepper. Things are going to get more expensive, but it’s unlikely that prices will rise a crazy amount. It was only a few years ago that we went through another price shock, so everyone has it in their short term memory. This may be like that. Not great, of course, but nothing is burning to the ground (except our credibility as a nation).

There is nothing else you can do (or maybe one thing)

Things are going to get more expensive. And that sucks. But you can’t do anything about it.

Well, actually, maybe there is something you can do:

Vote in November. Get as many of these corrupt clowns—those who support playing Grand Theft Auto with our world—out of office as quickly as possible. It might not bring prices down, but it might stop the next avoidable catastrophe.