Really?

The price of oil has dropped to a five-year low, hovering near $67 a barrel. The drop has sparked a frenzy of discussion about the impact this will have on global economies. Here in the United States, there seems to be an enthusiasm among economists and Wall Street talking heads that it will create an uptick in consumer spending, creating more demand for consumer goods—Mr. and Mrs. Jones will have more money in their pocket because they are spending less at the gas pump.

There has even been discussion that the gas war is over and that demand for bigger SUV’s will soon start to surface.

 

As a country and members of the human race, can we really be this shortsighted? It was just a few years ago that oil was over $100 a barrel, and the emphasis was on building electric cars and cars fueled by natural gas and expanding our electric rail system.

Climate change is real: you don’t have to look very far to see that our weather patterns are changing, ice caps are melting, and where there was once land it is now covered by water.

Like investing for your retirement or a child’s education, you can’t make long-term decisions based on short-term reactions. If you go back and look at a chart of oil prices over the last one hundred years, you’ll see they have gone up and down more times than Pinocchio’s polygraph test. (Don’t you love that Geico commercial?) Oil may have temporarily receded, but as soon as the oil barons of Saudi Arabia, Iran, and North Dakota decide to cut production, prices will rise again.

If we learned anything over the past five years since the financial crisis, it’s that you have to be positioned for both good and bad times. A portfolio must have the right mix of stocks, bonds, and cash to weather a storm. We still need to save more, and just because we are saving a few dollars each time we fill up the gas tank, that doesn’t mean you can now buy that 75-inch flat screen you have been eyeing or upgrading to that new Chevy Tahoe SUV. If you remain consistent in your lifestyle while tapering your spending habits, it will be a lot easier to ride the waves of up-and-down oil and stock market prices. More important, if we maintain an outlook of continuing to reduce our carbon footprint and not getting sidetracked by lower oil prices, the planet will be around longer for future generations to enjoy.

Shortsighted reactions = Bad long-term decisions