Five Big Ifs for 2006

If No. 2: Potential Pain at the Pump

If gasoline prices spike upward again, consumers will go back into a deep funk and cut back on purchases. Remember how depressed consumer sentiment was this fall when gas passed $3 a gallon? It's not exactly a coincidence that as gas prices peaked in September and October, consumer sentiment in the University of Michigan survey fell to a 13-year low at 74.2.

Gasoline prices have backed off. The national average for a gallon of unleaded, according to AAA, stands at $2.14, way, way down from the record high for the national average of $3.06 set on Sept. 5, 2005. Consumer sentiment, meanwhile, has recovered to hit 88.7 in December.

The next critical test for the energy-supply system -- everything from tankers to terminals to refineries -- will come next year when the oil industry starts to rev up for the peak driving season.

Should gas start to climb back toward or even beyond $3 a gallon, investors can expect another outbreak of consumer depression and endless news coverage about how low-income consumers will stop shopping at Wal-Mart. (I hope reporters have saved their notes and video.)

If we sail through the summer driving season relatively unscathed, it will be a huge boost to consumer and investor confidence. Lots and lots of folks will draw the probably erroneous conclusion that there really is no energy-supply squeeze. The crisis of 2005 will get filed away as bad luck.

After all, we can't have 26 named hurricanes every year, can we? Predictions for 2006 call for a drop to 17 named storms, a reassuring number unless you know that 10 is the annual average.