How America will go broke
Monday June 30, 2008
Categories: Peak oil
From Forbes.com, a view that the oil crisis upon us now is not primarily one of supply and demand, but speculative forces -- and that we're in worse trouble than we realize. Excerpt: What is happening now is not demand...
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About Crunchy Con
Rod Dreher is an editorial columnist for the Dallas Morning News, and author of "Crunchy Cons" (Crown Forum), a nonfiction book about conservatives, most of them religious, whose faith and political convictions sometimes put them at odds with mainstream conservatives. The views expressed in this blog are his own.
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I've heard so many cries that Disaster Is Upon Us in my lifetime (63 years so far, you don't want me to list the alleged disasters, I'd go on and on) that I'm just a little cynical.
I would say that the overwhelming probability is that Disaster Is Not Upon Us, and that all that is happening is that we will have to readjust our priorities a little, as we have to every six months or so. (Or every six minutes or so.)
Reagan used the cost of the arms race and star wars to bankrupt the Soviet Union and bring down the Evil Empire.
Maybe the oil-producing nations are secretly trying the same tactic on the U.S.
I think we are in for a major disrupition in our life style. We will have to become European like with density and mass transit. The South and West, and all suburbs, will feel the most pain. Still, maybe, FINALLY, we will develop an energy policy and find a way to use somthing besides foreign oil for our energy.
Rod,
It seems important to include the conclusion to the Forbes.com piece, which suggests potential solutions:
If regulators raised the margin requirement for oil futures to 25% from no more than 7.5%, the oil market would crack. Unfortunately for oil users, regulators are unlikely to boost the margin requirement, unless outside pressure becomes unbearable, because the income of commodity exchanges and traders would plummet.
But there are two other solutions to the oil crisis.
The first is requiring major players in the oil futures market to disclose their total positions of all kinds in crude. Given the importance of oil to the U.S. economy, everyone should be able to know who is going long crude oil in a big way. Institutional owners must report what stocks they own at least semiannually. Why should they not be required to report the amount of crude oil they are long?
The second solution is for oil consumers to make a concerted effort to go short oil futures. The U.S. government has been spending $280 million per month, pumping 70,000 barrels of oil per day into salt caverns. Instead of buying oil, why not go short 35,000 contracts monthly at $8,000 per contract, in other words selling high the crude we bought relatively low? What if other major crude oil users also went short oil futures each month? What if the Japanese government, airlines, trucking companies and utilities spent several billion dollars to go short oil futures each month until the oil market came to its senses?
It is insane for the world to go broke while oil traders and a handful of gangsters who control their national oil production make huge fortunes.
No one outside of the fringe believes that we are experiencing an oil bubble. The price rise is being driven by supply and demand and nothing else. The boards of all three US automakers believe it (witness the truck plant closings; or in Ford's case the truck plant retooling to build smaller cars). The heads of every major US airline believe it, and are cancelling jet orders and cutting back flights knowing that consumers won't pay the higher prices. The Chinese know it, and are trying feverishly to secure long-term oil supply contracts with whoever they can get to sign. The oil industry knows it, and have been trimming their projections of future production and raising their projections of future price.
The price rise isn't being driven by speculation. The speculation is being driven by the price rise. And many of the speculators aren't keeping up.
On that little housing cost tool, I'm two blocks off the "Housing + Transportation 0 to 45% of Area Median Income" and just across the street from the "0 to 48% of Area Median Income". Anyway, basically, all of Pittsburgh is affordable except for anywhere nice.
I'm curious how many commuters could telecommute instead. Even if 1 or 2% of drivers could eliminate their commute this could make a difference in increasing supply.
I normally pack my laptop up and commute 60 miles to work because the office honcho's like to see the workers at their desks (at least I use a train)...my wife does a 40 mile drive for the same reasons - the big boss likes to see people at thier desks.
As for moving closer to our work they are in areas where a small fixer-upper is in excess of one million
A friend of mine tells me today that her brother and his wife just bought a small house in Bethesda, Md., and paid $1 million for it.
The trick is to own a significant interest in the company in Delhi and let them telecommute for you.
MH: Anyway, basically, all of Pittsburgh is affordable except for anywhere nice.
That's the same story in just about every Midwestern and Northeastern city. Nice areas are expensive for *reasons.*
I sympathize with Old Susan, but I strongly suspect that this time, it's real. Why?
Factually, because it has always been clear that we could not continue accelerating our use of oil indefinitely. There's no breakthrough new energy source apparent, as could have come from human ingenuity (and still might, I suppose, though it's awfully late). Now the less developed nations are gearing up quickly to imitate us in energy use, and that's really, really a big deal.
Emotionally, I'm ready to believe it's real because I've been reading David McCullough's book on the Johnstown flood, seeing how the Old Susans in Johnstown on 5/31/1889 were saying "oh, they've been saying for years that dam would fail." Damn right they had, and they were right.
According to this linked article, European automakers sell clean diesel vehicles for the European market that get 70 mpg at the expense of US safety and environmental standards.
Americans are going to have to re-think their automotive standards.
http://www.popularmechanics.com/blogs/automotive_news/4219904.html
I strongly suspect that this time, it's real. [...] There's no breakthrough new energy source apparent
No need for breakthroughs. Not when we already have:
1. Nuclear power. With which we could replace all fossil fuels currently used for power generation. Not to mention nuking (*) the tar sands & oil shale.
2. Wind turbines: also useful as a supplement, and perhaps even for baseline power (**).
3. Geo Metros: Deploy enough of these on the roads, and you could double US gas mileage even without the hybrids (and John E's aforementioned VW Polo) that are already on the market, or the PHEVs right around the corner.
4. Cogeneration & heat pumps: Also useful for cutting residential and industrial energy consumption (***).
5. Railroads: which could substitute for trucks on intercity freight routes, and are also easily electrified.
I'm sure others can think of other solutions. The tech is there. As for the will to use it, however....
(*) Oil shale: mines.edu/Research/PTTC/newsletters/volume%209/v9n3p5.html
Tar sands: canada.theoildrum.com/node/2572
(**) Supplement: ergosphere.blogspot.com/2005/03/forty-two.html
Baseline power: environment.independent.co.uk/climate_change/article3194088.ece
(***) Residential: theoildrum.com/node/3661
Industrial: theatlantic.com/doc/200805/recycled-steam
"I've heard so many cries that Disaster Is Upon Us in my lifetime (63 years so far, you don't want me to list the alleged disasters, I'd go on and on) that I'm just a little cynical."
Just to counter-balance your comment: my parents, who are in their 70s and were young children during the Depression, actually DO think disaster is upon us. So I guess even among old folks there is a variety of opinion regarding what we are facing.
My name is Mehriddin I am 17 years old I like English language.I want go TO America.
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