The Oil Crisis: They Don't Know!

              The one thing that is undoubtedly on every Americans mind… Oil. The rich are concerned about it, many of whom are buying up commodities to hedge against inflation. The middle class (if there really is such a thing) is concerned about it, many wondering how they will fit in their summer vacations to the beach this year. And yet others, perhaps it would be safe now to call them the poor, are concerned about how they will continue working to feed their families. Oil is on every ones mind.

         You would think that in this day and age of instant global communications it would be easy to understand this latest commodity crisis, but like most Americans (and for that matter most people around the entire world) I find my self at a loss.  There are some things that just don’t add up. Some things that when you hear and see you have to step back and question everything that you are being told and seeing with your own two eyes. How does the price of oil and every other commodity rise nearly %50 in just a little over a year? Where do we even begin to look for answers?

         You could try what most seemingly well informed Americans do every night and turn on the television. CNN, FOX, MSNBC even PBS… take your choice they are all just about the same when it comes to the subject. Unfortunately they will all equally baffle you and leave you with nothing but unanswered questions. A commentator gets on with an opinionated, bias host and blabbers on for 5 minutes trying to explain something to the American public that the most brilliant economists in the world  will not be able to fully understand for years to come. I figure that watching the nightly news on  CNN or FOX will get me about as far as a 3 year old could trying to explain e=mc2.

         You could try looking it up on the internet but it wont get you much further than watching the nightly news will. When ever the price of oil rises or drops a few cents (which has never really made a large impact on bringing down the daily price of refined petroleum) another commentator writes the same rhetoric that we have read in every on-line article. You will also find little stories about other Americans who are just as miserable over the price of gas as you are, as though to try and reassure you that you are not alone.

         Just what are some of the reasons for the oil crisis?
         
         A year or two ago when ever the price of gas started to rise at an alarming rate we were told fables about how the latest tropical storm hit some obscure oil production platform in the Gulf of Mexico thus accounting for the rise in the price of gasoline. One oil platform, in the Gulf of Mexico… Lets do some simple math here.

         In 2006 the United States used 141,841,308,000 gallons of finished gasoline (you might find slightly different numbers from other sources but we will use this as an example because even if you consider the margin of error for our numbers the end result still turn out to be staggering). In July there is a tropical storm that sweeps through and devastates an oil production platform so that it needs to be repaired. So lets assume now that the cost of gas goes up 5 cents over the course of a week. To make the math a little easier we will divide 141,841,308,000 by 12 months in a year which comes out to: 11,820,109,000 gallons of gasoline per month. It will take 6 months to get the oil platform back up and running so we will charge an extra 5 cents and we will assume that we only charge this extra little tax for 2 months. 11,820,109,000 X 0.05 cents comes out to: 591,005,450 USD X the assumed 2 months is 1,182,010,900 USD. If the cost of oil get raised just 5 cents, and I have seen it raise higher than that in a weeks time, then some distributed group some where is profiting an extra 1.2 billion dollars. If you were to entirely rebuild the Bullwinkle Oil Platform in the Gulf of Mexico it would only cost you around 900 million dollars! And I know that they didn’t rebuild the damned thing so apparently BIG oil takes me for a total CHUMP!!

         In more recent times we hear one of my favorite little guises, Saber Rattling:  The term that is now applied generally to any indication of military unrest. You hear a lot of this about Iran now a days. The concept is, if I am not mistaken, that US and Iranian diplomatic relations have deteriorated so rapidly that it is only to be taken as a possible sign that the United States will soon launch a military strike against Iran, which would disrupt the already frail system of oil export to the rest of the world from the Middle East by destabilizing the entire region with another “Bush War.” If you really believe that after our “oopsie” in Iraq the Congress, the United Nations or if anything else the American people would allow our current or next President to preemptively invade another Middle Eastern nation, then I don’t know what say for your state of mind. So lets speculate all day while we are at it and use that as an excuse to drive up the price of oil because it sounds plausible and we only have 15 minutes to explain the rationale on CNN to crowd of desperate people hungry for any explanation. 

         So now that those two completely ludicrous scenarios are out of the way we are left with a few that actually make a bit of sense; There is the weak dollar, global competition and limited supply.  Two of these are and always were inevitable. The other we could have avoided but instead chose not to in light of corporate greed and Average Joe complacency . You can pick and chose which one you think contributes the most because that’s really all that any one else does any ways.

         Limited supply, well that’s awfully simple, there was only so much of it to begin with. Did we really think that we could just go one consuming at our phenomenal rate and never run out? How naïve do you have to be, as the leaders of any organization or government to believe that there is such a thing as a never ending supply of  any natural resource? But I don’t really think that our leaders believe that. I don’t think that they are naïve and I don’t think that they are stupid. What they are however is greedy. Our corporate leaders have raped our planet of almost the entire supply of the worlds oil (to date some believe that we only have 100 years of oil left on the planet) in less than 75 years. What’s even better is that for all this time they knew that one day the wells would run dry and yet here we are today with out a single “back up plan.” However, they also knew that they were getting filthy rich, acquiring such a vast amount of wealth and influence that has never before been seen in all of human history. So here we are, the commoners, the simple folk waiting to pay the ultimate price. While a small room of the most influential oil tycoons and their countless generations to come, will forever be out side of the global economy (no matter if we entered WW III and the planet was struck by the greatest financial disaster ever), we will at least know that we played no small part in contributing to our own demise.

         Global competition; when we hear it most of us automatically think of one word: China. There is no doubt that China will be our (U.S.) competitors and the competitors of the rest of the world. We will have to learn to share room with the economic dragons from the east, there is no avoiding it. What I find the most amusing is the irony of the situation that the U.S. finds it self in. American corporations  like Wal-Mart have forced almost every  supplier of American goods to out source its production to China so that it can bring us those low, low prices that we enjoy every day. Its simple, it costs less to produce goods in China and have them imported to the US. I don’t even want to consider how many American jobs have been lost to the Chinese. What I do like to consider is that really, in a way, going years and years back, we made China the strong nation that it is today. From adopting U.S. capitalistic ideals to bolstering their economy with exported goods across the pacific, the Chinese have done nothing but benefit ever since the first Wal-Mart opened way back yonder.  Now I am sure there are other slices to consider in this pie… but I think that I just narrowed down at least three quarters of them. Americans today have to compete in a global economy with a giant that we created with those low, low every day prices. Talk about living the dream!

         The last big one you hear about is the weak dollar. The Federal Reserve has slashed interests rates amid other world banks that have kept their interests rates at a level or even raised their rates. Slow economic growth has played its role in hurting the dollar and the trade gap took its 700 billion dollar bite out of our economy also.  Of course there was also the housing market crash and the subsequent credit crisis that has put millions of Americans homeless or bankrupt. There were so many things that could have been done better. We didn’t have to get thrust into a recession. I don’t need to point fingers at any one because collectively we have all screwed up big time. From the Fed not keeping up with world financial trends to the average American consumer living far beyond his means, most all of us in some way or another are as guilty as the next man.

         There are many good reasons that the price of oil has gone up. By that token, there are many B.S. reasons that we are fed every day to try and keep us satisfied. The cause of the oil crisis could perhaps best be explained as a vicious circle of numerous factors.  Exactly how much responsibility each part of the problem must assume,  is a complete mystery. I suspect that no one really knows exactly what triggered the oil crisis and I suspect that no one really know what factors are wreaking the worst havoc. We will probably not know for years and years to come. The exact cause of the stock market crash was not understood until decades of research had been done and even to this day there are some things that are still left to debate. So too, we will just have to wait a little while longer for any real answers.

         What is more important than understanding the intricacies of the oil crisis is understanding that there are alternatives. There are things that each of us can do to make an impact on our lives as citizens and as human beings. We can chose to live responsible and accountable lives. We can chose to hold our government and corporate leaders to a higher standard than what they are being held to now. We can chose to fight for alternative energy sources and wean off of fossil fuels.  What ever our plight, know that you and I still have a choice.