Has anyone noticed?
And speaking of gasoline, I found this post from last year interesting.
Originally posted on September 16, 2008, it was entitled:
Lessons from History - What You Don't Learn from Books
This was a reply in my comments section of yesterday's post, but, as you can see, I'm not a woman of few words, and so I decided to make it a post, instead.
For the record, I hope I am wrong with regard to my comments about the impending economic collapse. I hope I'm wrong, and rather than facing economic collapse, this is just a "normal fluctuation" of the highs and lows of our market.
I hope Deus Ex Machina is right and that the price fluctuations we are seeing at the pump and in heating oil prices and in everything oil touches (which is everything) are something other than global production peaking. I hope things will bounce right back, and we can continue living our luxury lives after having "survived" this little hiccup.
During the 1970s US oil production peaked, and due to some political mis-stepping, OPEC cut us off from receiving foreign oil supplies, which is kind of what caused the "energy crisis." We couldn't produce enough of our own, and no one would give us any. At that time, Presidents Nixon, Ford (to a degree), and then, Carter tried to move us closer to energy independence. In his 1979 Crisis of Confidence speech, Carter tried to outline his plan to reduce dependence on foreign oil. People didn't like it. They didn't like being told that driving big, gas-guzzling cars was morally wrong. They didn't like the idea of gasoline rationing. They didn't want to conserve.
And, as it turns out, they didn't have to, because a year later, Ronald Reagan stepped in and saved the day, by borrowing against our future, and giving Americans just what they wanted - cheap gasoline for their BIG cars and cheap energy to heat/cool their too large homes.
During his two terms, Ronald Reagan actually imposed the bans on mining tar sands ... er, shale oil extraction ..., and cut all alternative energy programs, including removing the solar water heating system Carter had installed on the White House; thereby, forcing us to invest all of our time and dollars in foreign oil imports. In his 1979 speech, Carter revealed that the US imported HALF the oil it used. Today? We import more than 75%.
Now, as he threatened back in February, President Chavez IS cutting the US off (seems a little too reminiscent of the 1970s OPEC fiasco, don't you think?). We import 13 million barrels per day of foreign oil. Venezuela was one of our top five suppliers. We use something like 21 million barrels per day.
I hope I'm wrong. I hope things aren't as bad as they seem to be getting, but I don't believe it to be true.
I have always known that "fossil fuels" as a resource were FINITE. If their origin (from dinosaurs) is to be believed, it is impossible to reproduce, it is not renewable (because last time I looked, there haven't been dinosaurs here in, at least, the last 10,000 years of recorded history), and at some point, it will be gone. Based on what I've read, we're halfway to the "gone" point, and worse, we've used that first half over the last 100 years, AND the rate at which we use it today is considerably faster than those resources were used 100 years ago. So, we'll go through the second half much more quickly.
As for the economy, while I was around in the 1970s and I remember some of it, I wasn't an adult, and so much of what happened was really too complicated for me to understand. I remember gas lines and unemployment and lots of problems. My family even suffered a bit of a financial hiccup at the time. So, I was curious, because I thought maybe I was missing something, that maybe what's happening today isn't even a minor concern compared to the economic hardships of the 70s.
So I did some sleuthing.
The worst unemployment got in the 1970s was in 1975, when it hit 9%. If you think about what else was happening in 1975, it kind of makes sense."29 Apr 75 - ... the official American presence in Saigon ends when the last Americans are evacuated by helicopter from the US Embassy roof. Within hours the Saigon government surrenders to the VC".
Of course, there may actually be no direct correlation between the last days of the Vietnam War and the economic turmoil in the US during that time, or the fact that over the next four years, the Army began forcing soldiers out of service by whatever means, which meant that many young men (and some women) who had been "employed" by the US Armed Forces, were now unemployed veterans.
The irony is that for all the remembering of how bad the 70's were with regard to the economy, during the period from 1974 to 2007, the highest unemployment rates were actually in the mid-1980s - not in the 70's. It wasn't until 1997 that unemployment finally dropped below 5% for the first time in more than twenty years.
I think the big difference between the energy crisis of the 1970s and what’s happening now, is to be found on this site, which shows our national debt from then to now with a column that converts yesterday's dollars into today's dollars.
If the numbers (and there are LOTS of them) don't boggle your mind, the debt percentage to Gross Domestic Product (all of those things we manufacture here in the US that we export to other places ... oh, wait, we don't do that anymore, do we?) should give you pause.
In 1979, at the end of the Carter Era, the debt percentage to GDP was 33% - on the absolute high end, but still considered acceptable with regard to the ability to secure financing. During all, but two years, of the Clinton Reign, the trend was improving. In the nineteen years of leadership by Reagan-Bush-Bush, only three years showed an improved trend.
Today, it's 66.3%. It's doubled since 1979, and at that rate, we have MORE debt than not.
In personal terms, if I had a debt to income ratio of 33%, that means that 1/3 of my income goes to pay my bills - not living expenses, but revolving bills like credit cards, car loans, finance company loans, student loans, etc. And then, there's my daily living expenses, food, clothing, electricity, heat ... that I pay for with the other 2/3rds of my income.
Right now, 2/3rds of our government's income (50% of which is income tax) is going to pay off LOANS. That only leaves 1/3 for things like infrastructure needs, the military, paying social security, the bloated welfare system, government research grants, providing funds for educational programs, that Universal health care some of our candidates want, the President's salary ....
No bank would lend me a dime if I had that debt to income ratio, and at this point, our government is, as the saying goes, Robbing Peter to pay Paul.
We like to mark the beginning of the Great Depression with the Stock Market Crash of 1929, but the ladder rungs leading up to that day were being fitted long before the Market bottomed out.
"Debt is seen as one of the causes of the Great Depression .... in the 1920s, American consumers and businesses relied on cheap credit, the former to purchase consumer goods such as automobiles and furniture, and the latter for capital investment to increase production. This fueled strong short-term growth but created consumer and commercial debt. People and businesses who were deeply in debt when price deflation occurred or demand for their product decreased often risked default. Many drastically cut current spending to keep up time payments, thus lowering demand for new products. Businesses began to fail as construction work and factory orders plunged."
From where I sit, it seems very much like what we see happening today: years of "cheap credit" to purchase coveted, but often unneccessary, consumer items, or for capital investment, resulting in excessive debt, both personal and business. Add to that our grossly inflated national debt (which was not an issue in the 1920s OR the 1970s), our almost total dependence on foreign (costly) oil supplies just to maintain our lifestyle (not even counting any new building we might want to do), massive job cuts, and a floundering banking system, and we have a rather volatile situation.
That post was written six months ago, and it's only gotten worse.
I still hope I'm wrong about how bad it might get, but can any of us afford to "wait and see" anymore?
Oh, and the price of gasoline is beginning its steady creep upward ... just in time for this year's tourist season.
On June 23, 2008, I posted this: On May 17 ... the price of gasoline was $3.72. Today, when I drove by the gas station, it was posted at $4.17.
It'll be interesting to see where it goes this time around.