"Give me your tired, your poor, Your huddled masses yearning to breathe free, The wretched refuse of your teeming shore. Send these, the homeless, tempest-tossed to me. I lift my lamp beside the golden door." The Statue of Liberty (P.S. Please be so kind as to enter through the proper channels and in an orderly fashion)

Location: Arlington, Virginia, United States

Friday, April 21, 2006

Dead Dinosaur Gunk Going Gold

LONDON (Reuters)— Oil (i.e. dead dinosaur gunk) rose to a new peak of $75 a barrel on Friday as investment funds snapped up crude futures and tension mounted over Iran's nuclear intentions.

This must be affecting the macroeconomies of the oil-consuming world in very insidiously-erosive ways.

Every consumer product runs on, or is accompanied by, or is made with, oil.


Plastic--ubiquitous plastic--is a petroleum product.

People have "worried" about Real Estate being "the backbone"--or driving force-- of this economy.

That's fine with Republicus, as American Real Estate is one of the few remaining durable goods that are produced domestically, built, bought, and inhabited right here.

But calling it "the backbone" belies the importance of the circulatory system--the blood-- for the health, sustainment, and growth of the economic leviathan, and that blood is oil.

The Fed has recently announced that they are finishing up their incremental raising of the interest rate (an announcement which caused a rally on Wall Street).

The recent, successive raises, of course, were counter-inflationary measures, and although Republicus can swear that he is spending more on staples like groceries and clothing than he has before, who is he to argue with the nation's top economists insisting that inflation has been at nearly zero for years?

There's no argument that the gas bill and gasoline purchases are higher, but that's not what petroleum derivatives are limited to.

Indeed, think of any product--any product-- to realize how instrumental petroleum is to the multi-sectional symphony of our--and to the rest of industrialized world's--macroeconomy.

The vegetables you eat that were planted, grown, and gathered from your backyard garden?

Where did you get the seeds? How were they packaged? What was involved in the process of making the little metal hand-shovel you prize for it's rustic simplicity? If you're not a nudist, you must be wearing clothes to dig around in your backyard, probably with synthetic fabric woven in somewhere, and wearing rubber-soled shoes.

All the items you purchased that were required to create your backyard Eden--the seeds, the tools, the clothes on your back and the shoes, and even the Real Estate--required some petroleum derivative in their production and for their distribution.

All the creature comforts we take for granted, and the definitive attributes of modern life--heated and air-conditioned homes, hot & cold running water, transportation--rely on petroleum to function.

And everything plastic is made with petroleum.

Of course, profit-driven industries and businesses pass on all production costs of the goods & services they supply to the consumer. That includes the taxes they have to pay (which have been lowered by the Bush Administration) and their own gas bills and the price of the petroleum derivatives needed for manufacturing and distribution.

The administration's supply-side tax-cuts have most certainly played a part in suppressing inflation, though the individual income tax cuts--not dramatic but not infinitesimal, either, as the critics belittle-- have most certainly contributed to the consumer's liquidity in subtle but significantly enough ways (which invites inflation), and there has been an added concern for inflation by the concurrent printing of more paper money at the Treasury and providing too much liquidity.

With all things considered (that never are in rhetorical, partisan soundbites), the formulae and number-crunching at the Fed that determines the sufficient level of interest to maintain vigor and encourage growth in a complex macroeconomy that is the wealthiest in the world and at the service of a nation that is ranked 3rd in population among all nations (4th if the populations of the nations in the European Union are combined) must resemble rocket science.

But there is the trade deficit (which, along with the National Debt--which itself is large-- plays its own insidious mishief on all sorts of variables that end up, one way or another, sooner or later, picking your pocket), and calculated into that figure is petroleum imports.

And so, the spike in oil prices--and, make no mistake, the spike will continue to climb-- will reverberate across the entire macroeconomy as microeconomies everywhere begin hemorrhaging cash just to maintain previous levels of operation, and receiving needed transfusions by raising prices.

How can inflation remain suppressed if oil hits $100.00/barrel?

Iran--and oil-industry "insurgent" saboteurs in Iraq--know this, and are willing to play havoc with the oil markets and incite economic chaos... the hopes of forcing economic collapses.

Of course, the Blame-America-First Democrats ignore all of that and simplify the problem--to a stupefying degree--by laying the blame squarely on the shoulders of the "powerful, corporatist, and greedy price-gouging" boys-on-the-board of the American-bannered oil industry (i.e. Bush's buddies).

The price-gougers are in the Middle-East, not Texas.

And as for left-wing environmentalist activists who have choked the American oil industry with regulations and blocked exploratory drilling but now shrilly complain about increases in oil-based cost of living, Republicus says to them: Well, the caribou are happy that they--though not American citizens--have been succesfully immunized to eminent domain seizures by your very efforts, and that, apparently, should be all that matters.

The good news in all of this is (1) that the top-level economists in the administration know this as well, and let's hope their rocket science solutions precludes the need for the rocket scientists in the Pentagon to provide their own solution, and (2) the fundamentals of supply and demand themselves may preempt any catastrophes by the simple fact that there's only so much consumers are willing--if not able--to pay for anything, and a dramatic seachange in the market may be triggered that will spur the weaning off of our "addiction to oil" (as President Bush admitted) and accelerate the pursuit of development and marketing of alternatives.

Like ethanol.


Anonymous Anonymous said...

Marx was wrong. The opiate of the masses is not religion. The opiate of the masses is the internal combustion engine.


8:17 PM  
Blogger John said...

Purdy good, Anonymous, purdy good.

"We're addicted to oil."

President Bush

1:01 AM  

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