http://www.msnbc.msn.com/id/24316855

That's what some experts are predicting. We are going to be in a world of hurt if this happens. I hope the commodity bubble bursts soon. This is late 1970's all over again. Stagflation after GOP mismanagement of the economy may be coming to us once again.

When is Bush going to open up the Strategic Oil Reserve? I thought it existed to moderate these wild fluctuations in price. Or does he see this as his last chance to give his oil buddies a nice big shot of profit before 1/20/09?

"does he see this as his last chance to give his oil buddies a nice big shot of profit before 1/20/09?"

Ya think! or as we would say auf Deutsch "Naturlich sehr."

His reasoning for not opening reserves is based in the fact that he doesn't think anything major is wrong with the economy. To him this is just a rough spot in his otherwise stellar management of the economy.

Fool me once ...

Oh wait, I forgot. He's sending us all a few hundred bucks.
That will make everything alright.

I just don't know

What worries me is the federal government’s lack of leadership on the whole alternative energy question. Whether we like it or not, the days of inexpensive gasoline are over. The world is growing up, with more people and countries consuming more of its resources. We should be making huge investments in finding alternatives to oil. Giving petrochemical firms nearly $20 billion dollars in tax breaks over ten years is insane. That money should be spent exploring alternatives to oil and oil based products.

There is an enormous shift in the global economy and resources once gobbled up by the United States are being used by growing economies of China, India and others. China is exploding economically – with India following suit. We need to be better prepared to deal with this shift of resources.

I pray to God that oil isn’t the only resource drying up. We are importing into this country great quantities of nearly everything imaginable. From food to pharmaceuticals, it’s coming into this country by ship, truck, train and plane.

We need to start thinking long term, and soon. If we don’t, can you imagine people who have never known hunger wandering the streets in search of food?

The Strategic Oil Reserve exists to supply America with oil in the case of a national emergency:

http://en.wikipedia.org/wiki/Strategic_Petroleum_Reserve

This certainly isn't an emergency - yet.

Oil had better not hit $200/barrel soon for OPEC's sake. That would probably provoke a serious recession worldwide and lead to a drop in demand, as happened in the early 1980s.

Andrew

"This certainly isn't an emergency - yet."

I'm not advocating a hair trigger release of the reserve, but does a worldwide economic collapse due to a stratospheric rise in transportation costs constitute an emergency or not? We seem headed there, and it seems prudent to release the oil before the emergency hits, if we can see it coming.

Remember that this is a worldwide increase, and that people in other countries accustomed to paying $5 a gallon are now paying $8-9 dollars. It's getting bad, and I've heard no indications of where the end of the tunnel might be.

The Strategic Oil Reserve holds all of 700 Million Barrels - about 2-3 months of current daily US consumption. It's hardly enough to put a dent in any "stratospheric rise in transportation costs." It's not really enough to keep America going for very long in the event of a long-term emergency. It's kind of a short-term buffer.

Anyway, OPEC may be greedy but they are not entirely stupid. They don't want a global economic collapse either. Last I checked a few years ago, Saudi Arabia was (surprisingly) heavily in debt. Maybe that's changed a little since the huge increase in oil prices, but don't think for a second they wouldn't be hurt badly by a sudden huge drop in oil consumption.

Andrew

If it's really a peak oil situation (and it might just be that), releasing our strategic reserve would only buy a small price cut, for a small amount of time.

Not worth doing yet, IMHO.

Also, if it's a peak oil scenario, when we use less, others will buy more. Demand will always be there, and it will always be out driving supply. From there, it's only a matter of who wants it more.

Given our weaker position, others can afford it more than we can. I'm not sure our strategic reserve is the right card to play.

Andrew, I'm generally in agreement with you - let this crisis pass and let the markets adjust. But the reserve, though 2-3 months of supply, would not be used as the sole source of oil...just dump 100 million barrels on the domestic market and see if we can keep prices sane (and as close to $3 as possible). Like I said, when does it get bad enough to use?

You also mention OPEC feeling the inevitable "sudden drop in consumption". That ain't happening unless we go back to 1970's style even-odd fillup days. We are very addicted to gasoline, and it will take a few years to adjust our consumption habits to any degree that will cause OPEC any discomfort. And even if we were able to reduce our consumption, countries like India and China are probably increasing their consumption at an equal or greater rate. I think OPEC has all petrolium-consuming countries by the short hairs.

Again, the SOR is intended for emergencies when the supply of oil is interrupted. There is no shortage of supply at the moment. And it would be dangerous to start dipping into it when it might really be needed in the case of some real emergency that disrupts supply.

Also, I highly doubt 100 million barrels form the SOR will have much effect on the price of oil. And what about replacing it? If the US government replaces that oil at market prices, what will it cost US taxpayers?

China and India's exponential increase in oil consumption isn't occurring in a vacuum, either. Where do you think Chinese and Indians are getting the money to buy cars? From the surge in exports to America. Their expansion of factories that consume oil is based on American markets. If the American economy goes into a tailspin, so do imports from China and India. That will slow their economies way down, necessitating a cutback on their oil imports...and so on.

Andrew

Aren't we replacing some of it now anyway?

I thought some of it was used a while back. Maybe that replacing is done now. Don't know.

So out of curiosity, if despite our higher wages and standard of living fuel cost are starting to crimp our economy, shouldn't those in India and China be hit many times harder? Costs them 120 dollars a barrel as well and their incomes are that much lower.

If your fill up has doubled in price, you will have to buy fewer consumer items. That gives a country like China a double whammy.

anytime you have one segment of the economy out pacing the others everyone will suffer..... Here we have several..... We depend on low cost fuel to sustain growth, without it, this will be more than another short term recession. Job losses, no growth in wages, higher costs across the board.... OUCH.

The Chinese Yuan has risen against the dollar by 10% in the last year. So a barrel of oil and presumably a gallon of gas in the last year have gone up 10% less for Chinese than it has for Americans. At the same time, I believe their income has been rising over the last few years. So I'd guess most Chinese are better able to afford gas for a car now than 5 years ago, despite the rise in gas prices.

The cost of a car is still out of the reach of most Chinese, actually, but there is a growing middle class who are buying them and driving them.

Andrew

A few things to consider:

Blaming current gas prices on Bush is a waste of time. The problem is far greater than anything Bush may or may not have done.

The rest of the world has been paying high prices for decades and consequently drives smaller cars. We have a country addicted to big rigs and lots of driving. There are many "wives" driving SUVs so they are safer when they collide with someone while talking on their cell phones.

Part of our high prices are based on lack of refinery capacity due to no new refineries being built.

The undeveloped world is waking up to the joy of driving, along with increased industrial useage.

A new source of energy for automobiles needs to be developed.

Opening up the Strategic Reserve is a short sighted "use up your emergency rations" approach and would be stupid.

Taking the gas tax off for the summer is a short sighted "it feels good for now" political approach that make no sense.

Drilling in Anwar and off the Coast of California might help a little, but it won't solve the problem. It won't produce enough oil to make a very big dent.

It all goes back to, for our own secure future, we have to get off of Mid-East oil dependence. Driving a little less and getting a little bit better gas mileage won't cure that. We need a new energy source for automobiles and industry. Until we get busy with a Manhatten and Apollo type effort, it won't happen.

We're still in the finger pointing stage, so we have a long time to wait for anything good to happen.

Deane, you are such a ray of sunshine.

But there is a lot of truth in your observations. Which path do you think leads us to "something good happening"?

It's ALL Clinton's fault!


That takes care of the EXTREME RIGHT wingnuts on this board.

I read somewhere that the actual VALUE of a barrel of oil hasn't changed all that much over the longer term.

If that's true, then this spike represents a fairly permenant situation, where oil has crossed the peak, and is being magnified somewhat by our currency problems.

Gold is way up too, and that's another value constant.

As far as getting hit harder, we have more to give than the Chinese do --I think. The way I see it, their living standard is already very low. So their multipliers, in terms of cost of goods impact, are lower than ours are.

We can give up a lot, and probably will as this continues. They, being lower in the change, probably will just die a bit faster and work more, not really changing too many other things.

it all adds up to no solution on the horizon.

I blame Bush and the GOP for inaction, Deane. I never said the problem was something they started. You can blame Clinton, but he only had "power" for 2 years, after that it was Newt and the contract on America.

We are just as dependent on Chinese loans as Middle Eastern oil. I guess non of that is the shrub's fault, either, huh?

As I said Andy, we're still at the finger pointing stage. Until we get past that and on to solutions, nothing good will happen. You just advanced it a few more seconds on the atomic clock.

"Which path do you think leads us to "something good happening"?"

Actually, what needs to happen is for the public to get fed up and start demanding a solution. Right now, all there are doing is bitching about the price of gas and looking for someone to blame. It's Bush for some, Congress for others (not their Congressman, of course).

The politicians, most of which are totally inept and shallow, will throw lip service at the public, hoping to get through the election. They'll look at things I talked about that won't do much, but they won't buckle down and bring the experts in for advice on how to really stop the problem.

My own suspicions are that the Exxons of the world have made such major political contributions, that politicians are hypnotized into inaction on anything that could cut Exxons profit.

Frankly, I hope gas goes to $6 a gallon. It'll take that to get the public's attention.

America has to get off the Mid-East oil dependency. Nothing but an alternate source will accomplish that.

"Frankly, I hope gas goes to $6 a gallon. It'll take that to get the public's attention."

Just remember that everything we buy is transported to us by a vehicle that burns fossil fuels. A $6 per gallon gas price means more expensive milk and bread, as well as more expensive gas for our cars (and more expensive bus or taxi fares). Inflation will rise exponentially if your hope becomes a reality.

" Frankly, I hope gas goes to $6 a gallon. It'll take that to get the public's attention."

Yep. And it would be better for the environment too. Win Win Lose Then Win Again.

On the other hand, if the price of gas continues to rise, only Americans will be able to afford gas and we'll have all we need.

FYI, Bill Clinton (speaking for Hillary Clinton) in Oregon on Saturday endorsed the idea of releasing some oil being released from the Strategic Oil Reserve for a temporary reduction of gas prices. He also endorsed McCain's proposal for the "gas tax holiday" this summer without mentioning McCain by name.

Andrew

Buying votes.

Bad idea.

$6 a gallon gas....
All I say to that is CHA-CHING! Oil profits are jumping and so am I!

Bill will say anything to sway the rural Oregonians away from Obama. The Clintons have been practicing guerilla politics ever since Hillary fell behind in delegates. The Clintons clearly represent the politics of the past, funded by the lobbies and big companies to the point it is hard to believe that they will do anything that is counterproductive to the groups they owe their successes on which includes big oil. We already know McSame doesn't have a clue, too.

Fresh approaches with limited strings attached are only going to be had with younger, less established leadership.

The Clintons have been practicing guerrilla politics ever since Hillary fell behind in delegates.

Since 1992 is more like it....

Deane_johnson:
It all goes back to, for our own secure future, we have to get off of Mid-East oil dependence. Driving a little less and getting a little bit better gas mileage won't cure that. We need a new energy source for automobiles and industry. Until we get busy with a Manhatten and Apollo type effort, it won't happen.

It's what I've been saying all along. Considering you admitted on this site you drive a big car, are you getting a smaller car, using less fuel? You're right, there's more to this than Bush's dipshit foreign policy, but there's talking and there's doing and from my vantage point, all I see in this country is talk. We aren't really doing anything about it because our government is afraid of offending big oil. We are a first world country with a third world rail system. Over in Europe, rail is on time and everyone uses it AND the governments invest a lot on it's infrastructure. You are right about the rest of the world. When I was in England, a cab driver I talked to told me $3.50/gallon was CHEAP! Hence the high use of rail over there. I at least try to walk my talk. I use Amtrak and MAX as much as possible and plan to buy some kind of hybrid soon. If everyone did that AND the government supported it through tax breaks, we could do a lot to lessen our dependency on foreign oil. Also, let's use the supplies we have in this country. There are a lot of oil rigs out there not being use simply because big oil sees no money in pumping them AND a lot of the oil we do have we export to China, but again we do nothing about these things because our government doesn't want to offend big oil. That's something you CAN blame Bush for.

Aok, doesn't it frighten you that I agree with you?

No, I'm not getting rid of my two Cadillac Sedan Devilles. But then, I don't drive much so it's not a big deal.

A Sedan Deville is a front wheel drive car though. I bet it gets way better mileage than an Escalade or many other SUVs.

http://automobiles.honda.com/fcx-clarity/

Speaking of alternative fuel, this is really, really cool.

"A Sedan Deville is a front wheel drive car though. I bet it gets way better mileage than an Escalade or many other SUVs."

Actually, not bad. 17.5 city, 28.5 highway.

"http://automobiles.honda.com/fcx-clarity/

Speaking of alternative fuel, this is really, really cool."

Now, that's more like it. Why does it once again take a foreign manufacturer to lead the way?

I don't know what the negatives might be to this approach, but it's time for testing in the marketplace to find out. Kudos to Honda.

"Why does it once again take a foreign manufacturer to lead the way? "

Maybe because foreign governments encourage, and perhaps even subsidize (*shudder*) this sort of development.

Yep.

This is what happens when we sell our future for bigger profits and false growth today.

What funds R & D? We've got federal dollars, private interests and corporations, public and private, right?

So, when we've moved everything we know how to do, out of the country, where does the innovation go?

It follows the production, of course!

Those actually making the goods every day, have a serious interest in both incremental and disruptive innovation gains.

We don't any more.

IMHO, this is more than foreign governments encouraging this stuff. It's our government specifically working to discourage it here! Business is constrained by government. Unchecked, it will exploit the people and the planet and other businesses to the fullest extent possible.

This is not an evil thing, or bad thing, it just is the nature of the beast.

Business does not want to do those things here because our standard of living is higher than it is elsewhere. Where there is a middle class, there are less overall profits, period.

Our government, which is actually US, allowed this stuff to happen by changing the rules. They unconstrained business, which then did what business does!

The only real fix is to reconsider those changes and thus bring some activity back here --or continue to suffer until our standard of living then becomes acceptable --competetive if you look at it from business perspective and that's scary, for production to then occur here.

The bitch is, given this open environment, that should any one region actually improve, it then is not being exploited to the max. Business will move on to where the exploitation is the very highest.

Do you have any evidence that a foreign government funded the research that led to this technology? I'm not doubting it, I'm just curious if it's true.

I was speaking generally. There is research happening both foreign and domestic.

Our current budget is only a small fraction of what we spend each year.

My greater point is that we might engage in core R & D, but commercial development will be hobbled by the fact that we do not have anywhere near the supporting infrastructure and services necessary to boot strap something right now.

We outsourced that.

(well, most of that)

As a nation, part of our issue is that we are currently suffering from the innovators dilemma. Current profit means are good enough to keep incentive low for actually disrupting that.

A disruptive movement is going to be required to move on alternatives to oil. Disruptive technologies generally have a very significant cost advantage over the established tech.

It's very difficult for us to build that cost advantage here, because we don't have the infrastructure in place to actually build it in a way that makes sense.

In my post above then, it should make some sense as to why the real solid developments are going to happen overseas.

We can change that, but it's going to take some deliberate government action in order for it to happen, or we simply won't capture the gains, nor will be be leaders at it.

Also, it may well be that some domestic company, or a multi-national with roots here, funded the tech. That's not really the point.

My point is, those that can manufacture are in the drivers seat. They have the ability to build the wealth, they get to lead on innovation and they capture the lions share of the economic gains from the effort.

The rest of us just buy stuff, pay middle men, and collect the smaller gains we are permitted to.