Oil prices will swamp subprime as market driver

Here’s my fearless forecast for 2008: The subprime mortgage mess will be far less important to investors next year than the price of oil.

The reason is simple: We don’t sell our homes once a week, but that’s about how often we fill up our gas tanks.

The critical questions are, will consumers face a pump price of $4 a gallon or more for gasoline, and if they do, will they pay it without curtailing their other spending habits?

In an offhand remark to a Chicago audience recently former Federal Reserve Board Chairman Alan Greenspan said it would take gasoline at $15 a gallon to change driving habits in America. That’s probably too high, but there is some number at which drivers will balk.

Chicago Tribune