Donal's picture

    Blaming the Ogres



    Before 1973, the normal price of oil was between $10 and $20 per barrel. From 1986 thru 2002, prices generally held between $15 and $30/bbl. Since the $147/bbl spike and the 2008 recession, the price of oil seems to inch up, then down, then up, then down with the new normal between the high $70s and low $80s. No one talks of speculation when the prices seem relatively stable, but make no mistake, speculators are always busy. And when prices rise, pundits will blame speculation instead of supply and demand. Except in Pakistan, where they blame the Oil & Gas Regulatory Authority (OGRA), which has just raised fuel prices between 7% and 9% in this decision PDF. OGRA attributes their increase to comparable increases in the prices in the Arab Gulf, but that is little consolation to the populace, as expressed in this editorial from the News International:

    Petrol shock

    People everywhere in the country wonder what they are to do when their own government turns against them and adopts all possible means at its disposal to ensure that their lives are made as difficult as possible. Certainly this is what seems to be happening now with the expected role of government – that of a protector of the people – changed into one in which it acts as a merciless tyrant. The increase in the prices of POL products by Rs4 to Rs7per litre will mean further inflation, already put over the past year at 21 per cent. .... The result will be an increase in the cost of virtually all items – and this coincides with expected further rises in power prices while sugar seems to be rising in price by the hour. ...

    People’s woes are not limited to the price hikes announced by OGRA alone. In the 24 hours or so prior to the announcement, and in anticipation of the POL price-rise, petrol stations refused to supply fuel, with a severe shortage leaving thousands of commuters stranded. Surely it should not lie beyond the ability of authorities to control such blatant profiteering. The fact that no attempt to do so was made reflects on prevailing attitudes – with people’s grievances apparently of little consequence.

    Each time such hikes in prices come, we are told that the government is helpless, that petrol prices have gone up internationally and the rise has been passed on to consumers and that power tariff increases are dictated by the IMF. But this is no consolation to those struggling to survive – all they know is that they can barely manage. ...


    But hey, that's in Pakistan. What happens in Pakistan surely couldn't affect us here. Aren't Americans too self-reliant to make our government the scapegoat for everything that disappoints us? Tom Whipple thinks otherwise:

    The peak oil crisis: the midterms

    If one cares to look still further into the situation one would learn that a consensus of knowledgeable observers is saying that total world oil production will likely start to decline within the next three or four years causing another great oil price spike and incalculable damage to the world's economy in its present configuration. Within the next ten years, the American (and in most other countries) way of life as it developed in the last century of abundant and cheap energy will become unsustainable and far reaching changes will have to take place.

    In a perfect world, such a drastic shift in our economic and societal prospects would be at the top of the political agenda. Elections would be fought over the best way to transition our economy and civilization to surviving with reduced and much more expensive energy. Unfortunately, this is not a perfect world and three federal elections soon will have come and gone without a hint of public debate as to the real causes and feasible solutions to our coming affliction. With little or no understanding of what is happening to them, and with many acting out of near desperation as their economic prospects plummet, a substantial portion of the electorate seems to have chosen the path of throwing incumbents of both political parties out of office. They seem to be hoping that some new, even unknown and unqualified, face can bring back the prosperity of the age of cheap oil. The voters, however, cannot really be blamed, for thus far no major political figure or opinion setting part of the mass media has stepped forward to explain what is happening to us and what are realistic courses of action.

    Presidents, of course, have to balance many competing forces. Since the nature of our coming problem became obvious to many five or six years ago, both the Bush and the Obama administrations have concluded that it is best to muddle along and not say anything to disturb the national polity. Both administrations have laid out the prospects of a return to the good times and economic growth that we in America have known for much of our lifetimes. The calculation has been that telling it like it is - complete with the prospect of little or no economic growth for a long time and the growing impoverishment of most of the population -- would be at best political suicide and at worst would crash the stock markets leading to instant misery and impoverishment for millions.

    When the Obama administration came into office nearly two years ago, they decided that in contrast to the Republican policies of tax cuts, a large dose of Keynesian deficit financing was all they could really do to help the economy recover. In reality, the massive dose of government spending seems to have only slowed the decline and did little to halt or reverse the steady rise in true unemployment that some unbiased observers now put in the vicinity of 22 percent.

    The unwillingness of both parties to deal with the real issue -- that the fossil fuel age is coming to an end and that we must rapidly restructure our economy and lifestyles -- means that sensible, proposals are completely absent from the political dialogue. Instead, the campaign of 2008 has degenerated into one of demonizing opponents and/or calling for a return to the values of the 18th century. No matter which party gains control of Congress next week, the inevitable outcome is still more gridlock, more economic decline, and rising unemployment.

    How is all this going to play out and how much longer will it take to set the country on some sensible transition to a world where, at least for a while, there will be much reduced availability of affordable energy? A change of heart by a President who soon will be up for reelection does not seem likely. Should he sit down in front of the cameras some night and explain the realities of depleting fossil fuels to American people, the results are likely to be bad. His opponents would immediate denounce such thoughts as un-American in a land where growth and optimism has always prevailed. The likelihood of any meaningful proposals for national action especially if they involved any new taxes or any perceived costs whatsoever to the hard-pressed voter would be dead on arrival.

    It seems almost certain now that we are actually going to drive ourselves over a great economic cliff with banners of "growth," "jobs," "return to the good old days," and "no taxes" streaming in the wind. It is going to be one hell of a train wreck - unlike anything the American people have ever known.

     

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