Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

2008 outlook: Spending

The big question: Will oil prices continue their surge in 2008 and wreak havoc with your budget? The answer, fortunately, is, not likely.

By Donna Rosato, Money Magazine senior writer

(NEW YORK) Money Magazine -- Although the cost of a barrel of crude jumped more than 40 percent this year to over $90 in October, the spike was driven more by jitters about unrest in the Middle East and forecasts of strong demand than by a drop in supply.

As a result, most oil watchers expect the price of crude to recede from its recent level of about $93 a barrel to an average of about $80 in 2008.

Make money in 2008:
The entire outlook

That's still up noticeably from a year ago, though, so when you combine next year's higher price with a colder weather forecast, you can expect to pay at least 10% more to heat your home this winter than in 2007 - and possibly a lot more.

Meanwhile, analysts forecast that you'll also face slightly higher prices at the pump - about $2.83 a gallon on average in 2008 (and $3.05 in the peak summer driving season) vs. $2.75 this year. Still, that's an improvement from the $3.15 a gallon you were shelling out in May, when prices topped out.

In addition, you'll find that the weak dollar has made everything from Italian leather handbags to a ski vacation in the Canadian Rockies more expensive.

But for travelers, there are still many places in the world where the dollar goes a long way. Among them: Latin America, Eastern Europe and many parts of Asia.

There's also good news if you're a gadget junkie, as competition among manufacturers leads to sharply lower prices on all sorts of consumer electronics, from flat-screen televisions to laptop computers and digital cameras.

The wild card: A crisis in the Middle East - for instance, a major confrontation with Iran - could cause a serious disruption in the supply of oil. So could a natural disaster that shuts down refineries as hurricanes did two years ago.

If that happens, crude prices could zoom past $90 again and stay there, eventually pushing gas prices well over $3 a gallon. Top of page