RIDING THE PEAK OIL ROLLER COASTER

"If you're searching for early signs that higher gasoline prices are starting to weigh on consumer demand, you might want to look at the latest SpendingPulse report from Mastercard Advisors..

Overall, April sales trends are mixed, with some sectors showing continued year-over-year growth, while others are flat or even negative, according to the report, which tracks sales across all payment methods.

The late timing of Easter, which shifted some sales from March into April, may make intepretations a little bit murky, but there are a few datapoints that suggest high gasoline prices—which are now topping an average of $3.96 a gallon nationwide—are starting to have an impact on consumer behavior."
CNBC

"U.S. retail gasoline demand fell last week as prices continued to climb, MasterCard Advisors' SpendingPulse report showed on Tuesday.

Average weekly gasoline demand dropped 1 percent from the previous week, MasterCard said."
Reuters

I've been wondering where the breaking point would be this time, where the price of fuel would intersect with the ability of people to pay it and then it would begin to depress the economy like it did in 2008. Then it had to get to $147.00 a barrel. This time it appears that somewhere around $112.00 will do it.

I knew that we'd never get to $147.00 because the economy is in tatters. It's not the debt fueled, high speed machine it was prior to the first run up in oil. So what's the next step?

I heard Stuart Varney say on Fox this morning that he thought we were going to see the price of gas plateau somewhere around $4.00 a gallon and them begin to drop off. He said that supply is high and demand is falling and he's right on both points. And we should expect to see this sort of see-saw pricing, the price of fuel going up and down, with each peak coming sooner and doing more damage as the economy grinds to a halt and demand for fuel falls, along with demand for everything else not essential to survival. I expect the low points in pricing will become higher and higher with each cycle, too. The dollar is collapsing at the same time the price is falling so regardless of demand and supply the cost of crude will continue to rise.

And then we have China. Can they survive without America buying their goods? I don't know. I do know that our good friends Saudi Arabia are busy right now cutting a deal with them to supply them the oil they used to send our way. I know that part of this deal will, in probably fairly short order, replace the dollar as the worlds reserve currency with the yuan. And our ability to buy oil on the open market will dwindle. And honestly, if we can't pay the price we're not going to get the product. It'll go to the countries that can.

When we lose our ability to get oil, cheaply and abundantly, everything changes in America and we haven't done a thing to get ready for it. If we are forced to live off what we can produce then just get ready to lower your lifestyle expectations. And believe me, the day of reckoning is coming like a freight train full of coal.

So, short term get ready to see the price of fuel fall a bit and then to see an uptick in the economy. The press and the government (the same thing, really) will tout this as evidence of a recovery and we'll be told happy days are here again. Don't believe it. Act and prepare like everything is about to change and the economy is still collapsing because it will be. It'll just be hidden for a very short while.

The next cycle we'll see a slowdown at a lower cost per barrel. How many more cycles can we ride this roller coaster? I don't know but I think not many.

So get prepared and pray because the worst is yet to come.

UPDATE: DOLLAR AT THREE YEAR LOW

"The dollar fell to a fresh three-year low on Wednesday and the euro briefly rose above $1.49 as weaker-than-expected U.S. employment data convinced investors that U.S. interest rates would remain low this year.

The yen also hit a six-week high against the dollar after data showed the pace of growth in the dominant U.S. services sector also slowed unexpectedly in April, another sign the U.S. economy may be hitting a soft patch. See [ID:nN04186623]

With markets worried about a yawning U.S. budget deficit, traders said signs of slower growth will only add to trouble for the dollar, which fell to a three-year low against major currencies Wednesday. It has lost 7.7 percent in 2011. <.DXY>

"The dollar got beat up pretty badly against the euro," said Firas Askari, head of foreign exchange trading at BMO Capital Markets. "The U.S. fiscal situation is a concern. Now it seems the U.S. economy isn't just tepid but actually cooling off again. That's not encouraging."
But Askari and others said concerns about slower U.S. growth also dulled appetite for commodities and higher-yield assets for fear a U.S. slump would reverberate globally."
Yahoo

All this means is that regardless of demand it will take more dollars to buy a barrel of oil. I can see two results that will come of this. One, the demise of the dollar as the worlds reserve currency is getting closer and closer. The rest of the world is losing faith in it and there is considerable pressure from China and Russia to create a basket of currencies to replace it. And two, as the dollar weakens and takes our economy with it the price of oil will rise at the same time the demand shrinks here in America, which should drive the cost at the pump down, narrowing the margins for the oil companies. At some point, and I really don't know when this will happen, they'll decide that they can make more money elsewhere and pretty much leave us sucking hind tit.

The result will be fuel shortages which will destroy our economy and way of life. When the trucks that carry the food can't get fuel to bring it to the stores what do you think is going to happen? When we can't get fuel to go to work what's going to happen? When manufacturers can't get fuel to move their products what do you think will happen? What happens when utility companies can't get fuel to run the trucks that keep our infrastructure up and going?

It won't take long at all for everything we take for granted to just go away. And that time is right around the corner.

And when it happens, and I'm convinced it will, will some one or some group try to use the pain and confusion to leverage a new political system, something that voids the Constitution and the rights it protects? If the pain is bad enough most people will accept anything.

Remember the North American alliance and the new currency, the Amero? I wonder whatever happened to that?