Monday, May 3, 2010

More Bad News About Oil

For those of you who read my last post, you know I think that the big oil corporations will seek to maximize claims of turmoil and interference in the transport and refining of oil and use it as an excuse to hike prices. Typical manipulation of the market to maximize profits while minimizing service to the US economy.

Well that was the bad news, this is the worse news. Unlike US consumption of oil which has declined 5% the use of oil in China has risen by almost 73% in the same period. The recent huge recession has eased use even further. Just to be clear – most of this reduction has not come about through increased efficiency. The reduction in US oil consumption is mostly a factor of our economic meltdown to a purely consuming nation. The fact is running forklifts around unloading goods made in China uses less oil than producing the items here.

China’s increase shows no signs of abating and the Indian and Chinese economies are showing signs of picking up. Despite common thought – the Asian super economies have become large enough to be self supporting. Unlike the US - both China and India are producing more middle class people and the middle class is the engine of economic growth. As a natural effect of this growth their demand for oil is increasing. Soon it will consume the tiny surplus between world oil production and demand.

Once that margin of surplus is gone – the price will rise to whatever the market will bear. Does anyone think we can outbid the Chinese on those oil shipments? Not a chance. Once oil supply dips into a world shortage prices will fly through the roof. It may not happen this year or even in 5 years but it will happen. The only way to avoid this disaster would be a giant meltdown in the Chinese and Indian economies to match the scale of our own. Since both nations are largely following the exact economic path we followed decades ago – that seems likely. But not in time to reduce oil pressure on the US in the incoming years. There is going to be a huge increase in oil prices to balance supply to demand and odds are we will never see another downward trend in oil prices as peak oil is either here or close enough for speculators to smell it.

We have squandered every chance we ever had to correct America’s dependence on oil and soon the time will come to pay the piper. What little real economy remains in an America globalized and financialized to death will crumble under oil prices that simply will not support the American way of doing business. It is no one’s fault but our own. President Carter warned us in the 1970s that we had to reduce oil consumption. If we had increased energy efficiency just 1percent a year from that time the United States would be an oil exporting nation today. America is headed towards an economic meltdown because we are short sided hedonist worshipping credit and short term profit over real solid national values.

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