This from Investment U:

When I started driving, gasoline still contained lead and regular was selling for 29 cents a gallon. My father remembers 10 cents a gallon.

While it’s highly unlikely we’ll ever see those prices again, you could see gasoline below $1 a gallon, and it just might hit $0.75 a gallon. It might not be in time for Christmas, but the Easter Bunny might leave it in your Easter Basket.

That’s not just wishful thinking on my part: The International Energy Agency’s (IEA) most recent monthly forecast (released just yesterday) indicates year-over-year global oil demand will shrink in 2008 for the first time in the last 25 years.

Why? Developed nations are skidding into recession and emerging nations have hit the brake pedal on economic growth. And when the United States – by far the largest oil user in the world – cuts back, the ripple effect is devastating to producers.

Oil-laden tankers are backed up at U.S. oil unloading terminals, waiting to unload. At the same time, the nation’s most recent oil inventory report shows that storage tanks are brimming with crude oil, gasoline and heating oil. But that doesn’t mean there’s no money to be made here. In fact there are a number of opportunities to profit in oil right now.

Global Oil Demand – OPEC Cuts Production

OPEC is scrambling to cut production of oil. Chances are good that they won’t cut far enough or fast enough. Supply destruction will continue to lag demand destruction for the foreseeable future. And that sets the stage for a continued softening of pump prices as well as heating oil.

And then, of course, there will be the cheaters: You can expect rogues like Venezuela and Iran to continue to pump and sell as much oil as they can possibly suck out of the ground, since there is little production accounting oversight on the part of OPEC. It was a big problem the last time we had an oil crisis back in the 1970s.

How low could it go? Merrill Lynch is on record predicting $25 a barrel. It has a fairly good chance to go even lower, before supply cuts catch up with global demand slowdown, which is still occurring.

How long will it stay low? It’s hard to say, but any increase in global economic growth would provide a boost in demand and a subsequent rise in the price of oil. Current economic forecasts, while mixed, don’t show much of an increase until the latter half of 2009 – or even early 2010.

For now, though, demand is still falling, with October alone registering a steep 8.3% decline in crude prices. Simple math says that if crude prices are cut in half from here, so, too, could the price at the pump. Car dealers with rows of gas guzzling SUVs on their lots would be jumping for joy.

But just like $147 a barrel was artificially high, so, too, would be $20 a barrel on the low side. As prices begin to stabilize in late 2009 or early 2010, oil will likely return to a trading range of $80 to $100 a barrel. It would begin to slowly rise from there as the global economy climbs out of recession and economic growth rekindles.

2 Places to Put Your Gas-Savings Cash

Naturally, there are a few ways to put your growing mound of gas-saving cash to work:

• Shares of Autonation, Inc. (NYSE:AN), one of the largest car dealer networks in the country, are off 50% from their 52-week highs. Any sustained reduction in the price of gasoline will likely have a positive impact on car sales, particularly in the hard-to-move segments of the market like low-mileage SUVs, vans and pickups.
• A more direct way to play this would be to pick up a few shares of Valero Energy Corp. (NYSE:VLO) that’s been bouncing along in a tight trading range of $15 to $20 a share since mid-October. Its profits are tied directly to the spread between the price of crude oil and the price of refined products (known as the crack spread). A widening spread bodes well for refiners like Valero.

While I’m not sure I’d be running out to buy a big SUV anytime soon, it’ll certainly be easier on the wallet when pulling up to the pump. But don’t get too comfortable with cheap gasoline. Prices will eventually revert to their natural mean. And in the case of oil, it will eventually be higher.

Source: Global Oil Demand: Are You Ready for Gasoline Under a Buck a Gallon?

This from Today’s Financial News:

If you are a retailer, you are at the mercy of your suppliers. A bad decision by some CEO or marketing manager that you have never met will greatly affect your future profitability. The way a retailer defends his supply-chain inferiority will directly translate into his success.

Wal-Mart (NYSE:WMT) is particularly good at managing its suppliers. In fact, the mega-retailer is so good at it, it does not have to manage its supply chain. It dictates it.

Sam Walton created this power through large-volume ordering, constantly demanding the lowest prices possible and diversifying his product line. If one supplier acts up, Wal-Mart simply replaces them. And because the company sells just about every product man has ever created, Wal-Mart can afford to weather out downturns in a few of its product lines.

In other words, if one of its suppliers goes bankrupt or consumers suddenly refuse to buy a certain brand’s products, Wal-Mart’s profitability does not disappear. The company has a well-diversified product line.

If Wal-Mart and its thousands of products are the best example, car dealerships have to be the absolute worst.

One product, one shot at success

Think about it. Most dealerships sell one, maybe two brands of cars. You go to one dealer for Fords (NYSE:F), one dealer for General Motors (NYSE:GM) and another for Toyota (NYSE:T). Buyers have lots of options and industry competition is huge, but individual dealers are at the utter mercy of countless variables outside their control.

Right now, the downturn in consumer spending, the lack of credit and the notion of bankruptcy in Detroit is driving potential buyers out of showrooms. Most dealerships are in dire financial situations.

Mike Jackson, the CEO of the country’s largest dealership, Auto Nation (NYSE:AN), says at least a thousand dealers will lock their doors this year and just as many, if not more, will follow next year. The only dealers that will escape unscathed are those that were smart enough to diversify their product offerings.

For example, Sonic Automotive (NYSE:SAH), one of the nation’s top dealerships according to sales, sells over 30 different brands in fifteen states. It also owns and operates 34 body shops. If the company is going to make it through this recession, its product diversity will be the only thing that gets it there.

Unfortunately, like so many of its competitors, Sonic has a horrid balance sheet. As of last quarter, it was sitting on well over one billion dollars worth of inventory. With just $7 million in cash, it will be interesting to see how it pays for that inventory.

If the company can find the capital to get itself through this downturn, it will be able to survive. But right now, few investors are willing to take any risks in the auto industry.

When we boil it all down, Sonic Automotive, Auto Nation, and the nation’s 21,000 other dealerships are at the mercy of Detroit, which is in the hands of Washington. A lot of things have to go right before investors should think about going long on the industry.

If you are an investor looking to take advantage of the market’s downturn and snag shares of the nation’s retailers at rock-bottom prices (which is a good strategy), be sure to choose the companies with diversified offerings that are not at the mercy of their suppliers.

Wal-Mart and its index-smashing performance is a great example of the opportunities that lie ahead.

Source: Retail Bottom Fishing: Will Auto Nation(NYSE:AH) or Sonic Automotive (NYSE:SAH) survive?