Five dollars buys the world

The fuel price roller coaster is on the upswing again, and the gas pump offers thrills and chills. But it hopefully has no spills since, at around $5.059 a gallon on Saipan as of yesterday, if I spilled any gas I’d take off my shirt, mop up the gas, then squeeze it into the fuel tank.

Whenever these gas spikes hit, people wonder if the spiked prices are the “new normal” or are just a transient peak. It is a fair question. Well, everybody has to make their own decisions about such things, but I guess we can say that about anything in economics.

But the economic fundamentals aren’t the only interesting side of that gig. Even the mere trading mechanisms can be a bit involved. That’s why I sat for the FINRA (Financial Industry Regulatory Authority) Series 3 (National Commodity Futures Examination) exam a couple of years ago. Yeah, I’m a geek for that stuff, and I have to remind myself that most people don’t share my interest in it.

But gas being over $5 on Saipan gives me an excuse to indulge the topic, though I promise to stick to the broadest possible take here.

Gas prices may be as close as the Mobil and Shell signs on Saipan, but the overall truth is a lot bigger: Commodities, and oil is just one of them, are going to make, and break, many a fortune in the coming years. In fact, commodities will also make, and break, many careers as well.

I’ve known a couple of people on Saipan who sent their kids to top U.S. medical schools but the next batch of high-flyers might be petroleum engineers.

In a May 24, 2011, Bloomberg BusinessWeek article, “Engineering Undergrads Reap Top Salaries Among College Majors,” petroleum engineers got top mention with reported median earnings of $120,000 a year. I believe it. From the accounts I’ve heard, petroleum engineers fresh out of U.S. universities are being snapped up as soon as they graduate.

In the more distant past, however, I also knew of petroleum engineers who were abjectly unemployed back when oil was $15 a barrel. So I’m not suggesting that any profession is fail-safe. In fact, to the contrary, it merely accentuates my earlier point that the world of commodities will make or break careers.

Of course, commodities have always zigged and zagged in price, so that’s nothing new. But what is new, at least in my lifetime, is that the world’s economic center of gravity is shifting from West to East. This stuff is just getting started, as industrial Asia’s appetite for commodities keeps growing: oil, beef, gold, coal, pork, copper, lead, silver, coffee, you name it.

Here’s another example of how distant action in commodities can pay off: When I was a kid, some of the older teenagers in the area went to Alaska to help build the oil pipeline. Some of them banked more money than their parents’ entire life savings.

Looking back to dusty historical accounts of the gold mining days of the old West, not only could miners strike it rich but the merchants who mined the miners oftentimes fared even better.

Last year I visited several gold mines, and a long time ago I flew a corporate airplane for a mining company. But the coolest thing I saw last year, in the remote outback of a lonely old desert, was three old prospectors who had a ’50s-vintage Willys truck that towed a water tank that sustained them in the mountains for a week at a time. It was a scene straight out of the Twilight Zone. One of them gave my wife a little vial with some of his gold findings, just little flakes, hardly of big money value, but of great value nonetheless lest we be tempted to write the whole thing off as a mirage.

And there are a lot of gold rushes going on right now, be it the literal gold, or the liquid kind such as oil. Entrepreneurs are cashing in too; the miners and the oilers have got to eat and shop and carouse someplace, eh? Also, skilled trades are in high demand in such areas, be it nursing, offshore oil rig helicopter flying, or certain types of welding, to name a few fields.

Five buck gas is more than just a hole in the wallet. It’s a reminder of how the outside world is playing for high stakes. Yes, very high, indeed.