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Deep in the human unconscious is a pervasive need for a logical universe that makes sense. But the real universe is always one step beyond logic. — Frank Herbert, U.S. science fiction novelist (1920 - 1986).

It’s common knowledge that the price of oil influences the price we pay for a gallon of gasoline. In 1965 a gallon of gas only cost 30 cents; last time I looked, gas was solidly over $3-per-gallon.

To help put things in context, stop and think of the other items we use on a daily basis that are affected by oil price increases. Start by determining how many things are actually petroleum based, then add increased shipping and transportation costs resulting from increased fuel prices, and you can see how this is all interconnected and widespread.

Many products use petroleum as a raw material. All plastic is 100 percent petroleum based. Polyester, rayon, dacron, nylon and elastic; petroleum based. As are cosmetics, chewing gum, footballs, hair coloring, milk containers, nail polish, running shoes, water skis and, please, don’t forget your credit card and all those computers. Therefore, the impact of rising oil prices is far reaching.

Crude oil prices are floating near record highs, and many analysts are certain they are going to keep rising above $80 a barrel. They bumped up to a close at $80.04 Sept. 13, then traded at a new high of $82.51 on the New York Mercantile Exchange on Sept. 18. Tricky economic conditions make predictions difficult, even in the wake of the Organization of Petroleum Exporting Countries’ (OPEC) decision to raise production, if only by a symbolic 500,000 barrels a day, a tiny fraction of estimated world production of more than 85 million barrels a day.

Consumers concerned about future gasoline prices can only guess due to the many factors involved. In the United States, gasoline prices actually fell 13.8 percent in July, and oil prices bobbed around daily depending on such factors as minute-by-minute guessing about whether oil shipments and/or refinery operations would be affected by storms closing in on the Texas and Louisiana coasts.

Oil experts point out that even as prices hover in the $3-a-gallon range, petroleum demand is still growing in the United States — on track to edge up 1.5 percent in 2007 compared to 2006. Current crude prices actually are still significantly below the $101-a-barrel reached in 1980 inflation-adjusted dollars.

From time to time, it is suggested that oil prices are on a bubble similar to housing costs of the last few years, with prices driven by speculators. Certainly, it is instructive to realize that on Jan. 18 prices briefly dipped below $50 a barrel (finishing the day at $50.48). That was on the heels of the OPEC resolve to begin reducing output in late 2006 as a measure against falling prices. OPEC nations are the source of more than a third of the world’s oil.

Global demand for oil has changed and continues to escalate as growing wealth in China and India – and many other Asian nations – spurs demand for energy. In addition, it is often noted in discussions about U.S. gasoline prices that U.S. refinery capacity is very tight in the wake of years of underinvestment.

While nothing is absolutely certain about oil prices, it can reliably be said that the era of cheap oil is history. Even if predictions of $100-a-barrel or $95-a-barrel oil do not come true in the immediate future, and if the current uplift is at least partially seasonal – prices usually rise ahead of winter in the northern hemispheres as companies increase their stocks of crude oil– the oil supply and price structure debate is as sure to continue as the daily soap opera, with new players appearing occasionally, just to complicate the story. Stay tuned.

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Darcie Guerin is a financial adviser and branch manager at Raymond James & Associates Inc. at 606 Bald Eagle Drive, suite 401, Marco Island. Contact her at Darcie.Guerin@raymondjames.com, 389-1041 or toll-free (866) 343-0882.