The owner of a gas station near my home told my brother yesterday that he is being told by his suppliers to expect regular gas to be in the $4.00 to $4.50 range by Fourth of July. Rumor? Crazy talk? I don't know. But, if he's right, the economy will stop. The ripple effect of high oil prices will cause the cost of everything to rise, not just the cost of gas. Diesel fuel is the blood that keeps the heart of our system pumping, moving goods from one end of the country to the other. And that doesn't even scratch the surface of how much oil we use as an ingredient in nearly everything we produce and use.
The local environmental damage of this oil spill in the Gulf may be the least part of the damage it does.
"Oil prices extended gains above $86 a barrel Monday as traders eyed whether a massive crude spill in the Gulf of Mexico would slow imports to the U.S.
By early afternoon in Europe, benchmark crude for June delivery was up 32 cents to $86.47 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 98 cents to settle at $86.15 on Friday.
Some analysts expect the 30-mile (48-kilometer) oil slick caused by as much as 210,000 gallons (795,000 liters) of crude gushing into the Gulf each day could undermine imports to key Louisiana terminals, helping to lower crude inventories and boost prices.
U.S. authorities have said imports have not yet been affected.
"The potential disruption of oil tanker traffic in the Gulf of Mexico is already having an impact on oil prices." Goldman Sachs said in a report. "Traffic of oil service boats and oil tankers through the Gulf will likely be slowed."
Oil is near an 18-month high of $87, last touched in early April."
NPR
"Most people fail to comprehend the full implications of affordable energy on the world economy. Gasoline prices are the most visible symptom of the problem, but are far from the most important aspect of peak cheap oil. The global economy is dependent on cost-effective worldwide transportation of products. The United States in particular is extremely dependent on inexpensive goods imported from China and other Asian countries. A sudden dramatic rise in prices of all those goods would cripple an already-struggling economy. But the problem is much more far-reaching than that. Many of the things we take for granted would never be possible without abundant and relatively inexpensive energy. Skyscrapers and other large construction projects would not be economically viable without abundant energy to operate excavators, cranes, and construction tools. Many areas thought to have been unsuitable for habitation before the advent of modern air conditioning and refrigeration are now major population centers. Old fashioned supply chains involving warehouses and long-term stores of inventory have been entirely replaced with just-in-time delivery systems that are highly dependent on fast and reliable long-distance transportation. In the United States particularly, millions of people are dependent on employment 50 or more miles from their homes. Energy is a component cost of virtually all products. If energy costs were to increase dramatically, so would the cost of all other items. In short, the world simply cannot continue to function in the manner we associate with “modern times” unless energy continues to be available at affordable prices."
Chris Martenson
"Today, as the oil from an enormous spill in the Gulf of Mexico creeps toward the shores of the southern U.S., the administration is having its doubts about the new policy. David Axelrod, senior adviser to Obama, told “Good Morning America” today that there’s a moratorium on the expansion until the recent spill can be controlled and investigated.
“No additional drilling has been authorized and none will until we find out what happened here,” he said."
Washington Independent
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The current gas pricing following this spill just doesn't compute compared to the cost of gas following Katrina. Eight days following Katrina gas prices rose by 5%. In some areas, prices jumped 40 cents overnight. I paid $2.79 four days before the spill and have filled up at the same station 4 times since the spill. The price of gas has gone down 10 - 14 cents per gallon. I'm happy to pay $2.65 compared to $4 but we have seen lesser events affect the cost of gas almost immediately. It has been 2 weeks since the spill and prices have actually gone down. 5,000 barrels a day times 14 days is 70,000 barrels lost. What am I not understanding?
ReplyDeleteThe well was exploratory so the loss of oil doesn't directly effect supply because it wasn't producing oil for market.
ReplyDeleteOil prices are being driven by demand in Asia and to a lesser extent by the "economic recovery" here in the States.
This spill will affect pricing in two ways. The first is if it effects the flow of oil to the refineries in Texas because it impedes shipping. Less crude will result in lower inventory, driving up costs. The second way it can affect pricing is through the American government deciding to restrict off shore drilling. If the markets know that we aren't going to drill then inventory will not keep up with demand, assuming the economy actually recovers. Regardless of what the economy does, this will cause speculators to drive prices up, over the short term. Long term, higher prices will cause what little recovery there is to falter, which should cause prices to fall, depending on demand from Asia.
All of this is just more evidence of the effects of Peak Oil. More demand for increasingly more expensive oil will cause shortages in the areas that can't pay the price. We aren't running out of oil, just the cheap high quality stuff.
It took oil at $147 a barrel to bring our economy to a halt in 2008. It won't have to get that high this time and the level that causes our economy to grind to a halt will get lower with each successive rise in cost.
We've entered a death spiral.