Sunday, September 8, 2013

The Tyranny of Distance, III

The Oil Conundrum is doing its thing, reasonably on schedule.

The Leftist Media and the tenured political operatives would have you believe that Shale Oil & Gas has solved the energy issue for Americans and Westerners in general, and y'all can go back to going into massive debt for your education, homes, cars, vacations, cosmetic surgeries...

I always like to go to the video tape. When the end of "Peak Oil" was declared because of massive increases in domestic production in the U.S. I went and had a long look at the stock price behavior and earnings of the companies that should benefit from any such outcome. Low and behold, the market didn't think much of "Tight" Oil & Gas.

This was confirmed by the earnings reports from Big Oil last quarter. I mentioned this as being a highly likely outcome in a post back in March, 2013.

What has really caught me by surprise is how well "the rich" have made out in the midst of all of this. I underestimated the Federal Reserve and the U.S. Treasury. Shame on me. The impact of zero interest rates on the liability side of the balance sheets of the 1% combined with the impact of QE 1, 2, 3, etc... on the asset side of the balance sheet of the 1% has brought the 1% through this relatively unscathed for now.

Of course, private demand contracted, and with it the labor participation rate, pretty much in line with total vehicle miles driven. It is still fun to watch the mainstream press go through their gyrations to explain the decline in driving.

I wrote this post back in November of 2006, nearly 6 years ago. While "the rich" can handle $100 per tankful gasoline, the 99% cannot. A 2 car family earning the American median family income of $52,762 must accept, or are being forced to accept, the realities of the "Tyranny of Distance". People earning $15 per hour, TWICE the minimum wage, simply cannot spend $1000 per month in total automobile costs. Unfortunately, our "typical"American two-income family needs 2 cars for those 2 (or more) jobs. Given the realities of child care and total auto expenses, the jig is up: The two income family for the 99% is kaput. Notice I said "family". The response has been to give up having kids - the American fertility rate of 63 children per 1000 women between the ages of 16 and 44 is a new all time low. The Media beat itself senseless trying to paint this as the bottom. Maybe. That remains to be seen. We have created an economic system here in America in which raising children without overwhelming inputs from the State is nearly impossible for the majority of the population.

How did this happen in a nation with 80% of the population living in an "urban" environment? (Wasn't urbanization the answer?)

Well, that's a good question with a very complicated, multi-part answer. In short, politics.

(Have you been following the "Naval Academy rape case"? How is it possible for a woman to drink too much, get into a car, drive the car, and be a criminal... but if that same woman has too much to drink, gets into a car, performs oral sex on a man... she is a victim of rape? How is it that she is capable of making a culpable decision to drive BUT NOT for performing oral sex? In what universe does that make sense? Can anybody make ANY sense out of that one? Welcome to the politics of the Feminist Left and their cohorts in the Education/Industrial Complex.)

It will be interesting to see how this all plays out. I sincerely doubt that the bottom half of the American income pool can afford higher Oil prices. Oil has become elastic for them at the volumes they consume Oil at these prices. I doubt that that is the case for the Chinese or Pacific Rim Oil consumer. It will be interesting to see if demand destruction curbs production (and prices) at the margin (Tight Oil) or if prices will continue higher. The price curve for Oil is in serious backwardation. I haven't seen $25+ backwardation since 2008... and we all know what happened then.

Which is why America is about to engage in another Act of War on a Middle East nation. Our government does not give a good fart about 400 dead children gassed in Syria. There are millions of starving children around the world we could be feeding. No, what we give a good fart about is not letting unrest spread to Saudi Arabia. That's it. That is our entire Middle East strategy. Now, I have no idea how our government arrived at the idea that launching cruise missiles at Syria is going to help with that strategy. Frankly, I don't know what any elected official is thinking of besides their next election (but its the lobbyist/regulator/security apparatus folks that scare the sh#! out of me in any event). Yet here we are, with a completely de-stablized Iraq, a de-stablized Af-stan, a de-stablized Libya, a de-stablized Syria... you get the idea.

An Arabia without the "Saudi" is not unfathomable. The impacts to the West are.






















13 comments:

PioneerPreppy said...

Interesting. I had not been following that rape case but it certainly doesn't surprise me. Rape to the Femocrats is simply buyer's remorse more than anything else in so many ways.

As for the rest some good observations. If the Saudi's fall so does the petro-dollar and so does the US economy.

Anonymous said...

I too have been nothing less than amazed at how the Federal Reserve and the powers that be have pulled off the massive print out/bailout that they have. Along with the blatant, open erosion of privacy and personal rights, nor to mention the Empire's continued war making and drone bombing - I am amazed at how plastic and anesthetized my fellow citizenry are concerning all of it. Only a very few will even participate in a conversation about any of it, or will say I am being "negative" and so on, then go back to how the Patriots are doing, and so forth. I have no dogs in this hunt. Having no kids myself (just lots of nieces, nephews, and former students), why I should care, apparently more than they I have no idea.

Stephen B.

Greg T. Jeffers said...

PP:

I am curious to ask the Feminist/Left this:

2 Gay MEN get into a car and both have had too much to drink. One performs oral sex on the other.

Which one is the criminal and which is the victim?

PioneerPreppy said...

Greg - I think their little scheming feminist heads would explode. It would be like one of those temporal distortions from a sci fi movie. They are both guilty because they are men but both innocent of any wrong doing because they are gay.

It's like those divorce cases between two lesbians with a sperm donor father. They will just pretend the whole thing never happened.

sriparnachoudhury said...
This comment has been removed by a blog administrator.
Anonymous said...

There won't be any war in Syria...Vladimir Putin has come across looking like a hero for protecting his boyfriend and crushing on Basar Assad... Just like he looks cagey for protecting Mr. Snowden, another cute gay guy. Vlad, come out of the closet dude. It would be incredibly cool for the former head of the KGB and a trained assassin to admit he is a gay guy in love

Anonymous said...

We live in a world with imperfect justice...If you doubt this talk to Trayvon Martin's parents

Anonymous said...

"Feminist" is a really stupid word and a perversion of the English language. But any word which was invented in the last fifty years for political reasons is likely to be stupid. It's like "racist" - there is one human race. Racist would be appropriate only when comparing humans to another species.

Its not oil prices devastating the so-called middle class in the US, it never was except for a few brief periods of oil shock. The US is producing over 7 million barrels of oil a day. We don't need Middle Eastern oil anymore.
What has been destroying lower income people is the perpetually increasing cost of health care and education, both of which over the last 30 years have experienced annual inflation rates several hundred times the rate of GDP growth. This is simply due to college administrators jacking up college costs because they can get away with it (people keep paying it) and insurance companies running a racket unregulated by the federal government.
And the good news is the Millenial generation is alot more savvy than the Gen X or Y'ers and the days of six figure student debt may be over forever. Thanks to the Presidents of Harvard and MIT (both women) anyone can now attend classes at Harvard or MIT and receive a certificate of completion on line absolutely free. Any poor dumb kid anywhere in the world can get an Ivy League education. And that is a beautiful thing.
And thanks to health care reform Americans will no longer have to be held hostage by paying twice what other countries pay for mediocre health care. Hospitals and surgeons will have to compete on an international basis as medical tourism is thriving. No one is going to pay $150,000 for an elective surgery you can get in Europe for $15,000. Worthless insurance middle men will have to find something else more productive to do, as countries with managed competition between insurers (such as Germany) experience a reduction in cost and an increase in the quality of care similar to what is seen in countries with single payer health care systems.
People will use the savings to buy more fuel efficient cars

Anonymous said...

Last yr I paid 13,000.00 for daycare. That is 3 kids 4,3, and 1yrs old and the youngest was only their for about 5 months. I can't buy a new car because it is eating me alive, but I am good at being stressed out.

Dex

Anonymous said...

Dex,

I feel your pain. But you just need to remember Matthew 17:34. "He with fattest cock most likely to knock up old lady."

Anonymous said...

PioneerRacist,

You seem to have issues with women, but that is a normal feeling for a life long virgin. Just keep that right hand lubed up for the long haul.

Anonymous said...

Wait, it just dawned on me-- Dex reproduced? I guess it's true that Neanderthal DNA is compatible with that of Homo sapiens.

confederate miner said...

Hey Greg haven't heard from you in avwhile. Hope you are alright. I highly regard your insight on energy and other things. What do you think about about the coal sector. I have been checking it out and it seems to be the most hated sector out there. I have already dipped my tow in on aci. Logic tells me coal aint going away anytime soon. Almost ready to bet the farm on it. If you would do me a big favor and give me some of your insights on coal I would owe you one. For all its wort I work in the river industries pushing barges of commodity., and business is very good probably pushing mire raw materials than I can remember in a long time. Anyway hope nothing wrong. If you are havin some problems let me know I would be glad to lend a helping hand. Brian wester Kentucky.