Soaring Energy Costs are About to Change Everything

All signs suggest that planning for real change won't come until it's too late. "People don't wake up until things are flying apart," says Matt Savinar, a California lawyer who runs the website Lifeaftertheoilcrash.net. Savinar is the kind of observer who not long ago would have been considered a doomsday prophet. Nowadays, he says he feels more frustrated than he does vindicated by the soaring gas prices. Everything he's been preaching is coming true, but still no one is listening. "I bet that once we get within a few years of oil production peaking you'll see the U.S. invade the last large deposits. Oh wait, that already happened. You'll see rising food prices. Oh wait, that already happened. You'll see sky rocketing oil prices. Oh wait, that already happened. If you imagine your worst nightmare, we're right on track for that to come true. Just look at the news."


Jeffrey Brown: We May Be Only Days or Weeks from a Net-Export Crisis

It's usually hazardous to pay too much attention to short term data, but in
the past few weeks total net imports into the US have been dropping like a
rock, so last week's EIA data fit the very short term trend. I wonder how
much of it is simply a falloff in oil exports from Venezuela and Mexico -- it
looks like almost all of the recent decline in US crude oil inventories has
been on the Gulf Coast. If this is the case, refiners on the Gulf Coast are
going to have to bid the crude price up. One of the problems is the
considerably more time that it takes to replace oil imports from Venezuela
and Mexico with imports from other sources--because of the distances to
other oil exporters. It's possible that we could see some problems with
refined product volumes in the Gulf Coast area in the very near future.

Wall Street Journal: Oil Exports Unable to Keep Up with Demand

Relinked in light of Jeff Brown's article on a (possibly) imminent net-export crisis:

The world's top oil producers are proving unable to put more barrels on
thirsty world markets despite sky-high prices, a shift that defies traditional
market logic and looks set to continue. Fresh data from the U.S. DOE show
the amount of petroleum products shipped by the world's top oil exporters
fell 2.5% last year, despite a 57% increase in prices, a trend that appears
to be holding true this year as well. There are several reasons behind the
net-export decline. Soaring profits from high-price crude have fueled a
boom in oil demand in Saudi Arabia [and other producers] . . .

Newsweek: Oil Could Hit $200 in the Next Few Months

So far the price shock has triggered the most obvious consumer shifts in
the United States. Europeans, already greener, are also are buffered by a
stronger currency, and Asians are protected from the spiking price of oil by
subsidies that control the impact on gas prices at the pump. But if oil
prices continue to rise, and the subsidy dam breaks, as seems likely, the
energy revolution now transforming America will spread.

RigZone: Oil Industry Battens Down the Hatches for Hurricane Season

June 1 marked the beginning of the Atlantic hurricane season, a dangerous,
high-risk five-month stretch for any company operating in the Gulf of
Mexico. Hurricane preparedness is essential to the oil and gas industry in
the Gulf of Mexico, a fact underscored by hurricanes Katrina and Rita,
which in 2005 caused widespread destruction and seriously threatened oil
production. Across the industry, preparedness is the watchword.

Houston Chronicle: The Price of Everything Will be Going Up

Consumers, already hit by $4 gasoline and rising food prices, now will see
rises in the price of almost every product and many services, including
essential government services such as education and police protection.
Across the nation, school districts are limiting field trips and, in some
cases, canceling classes one day a week because they can't pay the
doubled cost of operating school buses. In Texas, the Legislature is going
to have to revisit the subject of school finance, again because the system
won't let school districts increase revenues to pay for higher fuel costs,
threatening some districts with teacher layoffs, even bankruptcy.

First Post: Current Array of Global Crises Are Worse Than We Think

First, a climate crisis, then an energy crisis, now a food crisis. No wonder
we've forgotten the poverty crisis that was declared the mother of all
crises by the G8 only a year ago. Yet, our success in tackling these
predicaments doesn't seem to match the urgency we accord them. People
don't stop travelling or even change their light-bulbs. Meanwhile, the steps
we do manage to take turn out to conflict. Biofuels hijack farmland;
enhancing agricultural output requires more oil; even scrapping food
packaging increases waste by reducing the contents' longevity. Maybe the
problem is that we're looking at things in the wrong way. Perhaps these
supposedly separate crises should really be considered facets of one
straightforward, if intractable, phenomenon.

Michael Klare: Scarce Energy Wars Can Quickly Lead to Deadly Wars

While these militarized maneuverings can be read as part of an ongoing
effort to force Georgia's pro-Western leadership to pay greater deference
to Moscow, they must also be viewed in light of Russia's larger geopolitical
struggle with the United States over the flow of Caspian basin energy.

Associated Press: High Gas Prices hit Consumers Worldwide

Consumers, gas retailers and governments are wrestling with a new energy
order, where rising oil prices play a larger role than ever in the daily lives of
increasingly mobile people.

Financial Times: UK Stores Begin Rationing Rice "Indefinitely"

Supermarket chains have begun rationing rice as the effects of rising prices
and disruptions to supply spill over from specialist grocers and suppliers to
larger stores. Netto, the Danish-owned discount store, has been restricting
sales of larger bags of rice to one per person in all stores in recent weeks
across the UK. "We are experiencing a high demand for rice and have
introduced this measure across our 184 UK stores to ensure that all of our
customers have a fair opportunity to make their regular rice purchases.
Our smaller 1kg packs remain on free sale with no restrictions planned at
this time." It expects the restriction to continue "indefinitely".


Business Week: "Rising oil prices and plunging home prices could turn a mild recession into something more threatening . . ."

In Charlotte, N.C., gasoline at nearly $4 a gallon is cracking "the survivors,"
as credit counselor Bruce G. Hamlett calls them. They're the people who
played by the rules and kept up their mortgage and utility payments even
as neighbors gave up and moved away, leaving empty homes. Now, crazy
prices at the pump are pushing these survivors over the edge. "They're
asking, 'Do I put gas in my car or do I pay this utility bill or do I pay the
mortgage?' It's getting to the point where it's an impossible choice."

US News and World Report: Peter Schiff's Worst Case Scenario

There's nothing good to say about our situation. The policies both the Fed
and government are pursuing are making the situation worse. We've been
getting a free ride on the global gravy train. Other countries are starting to
reclaim their resources and goods, so as Americans are priced out of
various markets, the rest of the world is going to enjoy the consumption of
goods Americans had previously purchased.

Weekly Standard: It's Only Going to Get Worse

The current downturn, by contrast, is due almost exclusively to a change
in the housing credit cycle from excessively easy to modestly restrictive.
Housing turned down before the economy, and even now, nearly 18
months into the housing recession, the national unemployment rate is still
at what economists consider full employment. That is unlikely to last as
credit problems spread into the consumer sector, layoffs spread, and the
resulting rise in unemployment makes the situation still worse.

UK Telegraph: Banks' Credit Crisis Solutions Have Echoes of 1929

We are in the midst of the worst financial crisis since the 1930s," warns
the eminent financier George Soros in his latest book, The New Paradigm
for Financial Markets. It's a rather extreme view, but the man who broke
the Bank of England is not alone in his dark funk. At a recent event, one
banker laced Soros's sentiment with a little gallows humour, ruefully
predicting "10 years of depression followed by a world war".

Wall Street Journal: Tapped Out Americans Get Desperate for Cash

As consumers max out their credit lines and banks clamp down on lending,
many older and middle-class Americans are resorting to pricey, often-risky
alternatives to stay afloat. Some are depleting their retirement accounts,
tapping 401(k)s for both loans and hardship withdrawals. Americans are
resorting to these more extreme measures due to dwindling jobs, falling
home prices, shaky credit markets and a run -up in food and energy prices.

NY Times: Consumers Lean on Rebate Checks to Pay for Food, Gas

The federal government is showering households with tax rebates to spur
spending and invigorate a troubled economy. But many Americans are so
consumed with debt and the soaring price of gasoline that they are opting
to save the money or use it to pay bills, according to surveys, sales data
and interviews with people from Florida to California.

Chicago Tribune: Drivers Putting Less Gas in Tanks, Then Running Out

With gas prices hovering at $4 a gallon, motorists like Saba are putting less
fuel in their tanks -- then coming up empty on the highway. Though
national statistics on out-of-gas motorists don't exist, there's plenty of
anecdotal evidence that drivers unwilling or unable to fill 'er up are
gambling by keeping their tanks extremely low on fuel.

NY Times: Banks Close Doors to Community College Students

Some of the nation’s biggest banks have closed their doors to students at
community colleges, for-profit universities and other less competitive
institutions, even as they continue to extend federally backed loans to
students at the nation’s top universities. The practice suggests that if the
credit crisis and the ensuing turmoil in the student loan business persist,
some of the nation’s neediest students will be hurt the most.

NY Times: The Trouble in Housing Trickles Up

To make matters worse, these outlying suburbs were built on the premise
of cheap gasoline, says Keith G. Debbage, a geography professor at the
University of North Carolina at Greensboro who tracks the local economy.
With gas at $4 a gallon, travel costs are now a serious consideration. Oak
Ridge and Summerfield are bedroom communities, he notes, and many
commuters drive 30 to 45 minutes each way to jobs . . .

Barrons: Home Price Erosion Hits the $5 Million Plus Market

A slice of the good life -- the really good life -- has gotten a lot more
affordable lately. From Miami to Beverly Hills, homes with bowling alleys,
theaters, steam rooms, heated decks, six-bay garages and other luxuries
are sitting on the market for at least twice as long as they did a year ago,
and many sellers are doing what was unthinkable: slashing prices.

Boston Globe: Home Prices See Sharp Decline

Home prices across the northern suburbs posted sharp declines from
January to April, with double-digit percentage drops recorded in several
communities compared with the same period last year . . . Cities,
particularly urban centers hit hard by the subprime mortgage crisis . . .


Wall Street Journal: Number of Foreclosed Homes Keeps Rising

A surge in defaults has increased the inventory of bank-owned homes,
known in the trade as REO, for "real estate owned." By cutting prices,
lenders have managed to increase sales of such homes sharply in recent
months in some cities hit hard by foreclosures, including Las Vegas, Detroit
and Sacramento, Calif., local real-estate brokers say.


Financial Times: Oil Prices Plunge Airlines Into Uncharted Territory

Giovanni Insignia, director general of Iota, the International Air Transport
Association, said: "Oil skyrocketing above $130 per barrel has brought us
into uncharted territory. Add in the weakening global economy and this is
yet another perfect storm." The situation had "changed dramatically in
recent weeks," he said . . .


www.lifeaftertheoilcrash.net

 

I going to sing the "doom song"