Here’s an imaginary letter from a reader:
“OK, Mr. Smarty pants, where’s that expensive gasoline you were promising us? Back in June, you said
All those fruits and vegetables we’ve been getting from Peru, New Zealand, Central America–fuel costs are going to price them right out of the market for everyone except the incredibly rich….
but yesterday when i went to fill my gas hog, it only cost me fifty bucks, instead of last summer’s eighty. That’s fantastic! Thirty bucks cheaper! Not only that, but lower oil prices have Iran and Venezuela and Russia sweating blood and holding their tongues–plus, Mr. Environmentalist, those tar sands in Alberta you like to squawk about aren’t profitable at sixty-five dollars a barrel. So everybody wins! Why the long face, dude? Let’s party like there’s no tomorrow!”
Well, dear imaginary reader, you got that last part right. There will be no tomorrows, at least none anything like the yesterdays we all know and, more or less, love. What we are experiencing now is the point in the tsunami when all the water has drawn out to sea, leaving a vast expanse of exposed sand to tempt the unwary. Excuuuse me, I’m not going to party. I am going to keep working on this ark of mine, while there are still nails and lumber available and while I still have funds to purchase them.
Consider this: sure, oil consumption in the US fell five percent last year–but oil production, which has been flat for the last three years, could fall over nine percent in the next year, due to falling productivity of older oil fields combined with weakness in the economy and consequent lack of funding for new oil projects–and let’s not forget that pretty much all new oil projects require a higher per barrel price to compensate for the greater difficulty of exploitation.
Note, too, that lower oil use in the US was offset by higher use in China–and sure, their economy is closely linked with ours, and will tend to slow down as the tapped-out US market cools off, but there are limits that are difficult to penetrate. Discretionary driving has been sharply cut in the US, but the gasoline usage that remains is much less subject to erosion by high prices, and discretionary spending is down, but most of what people need to purchase on a regular basis these days comes from China. “We can’t make it here any more,” as Mr. McMurtry has so ringingly and eloquently pointed out. Music later–this is by way of pointing out that demand is likely to remain constant as supply decreases, and you know what that does to prices.
Another merely temporary factor in lower oil prices is that, yes, some of the price hike was driven by speculation, and now, due to the credit market crunch, a lot of high rollers are having to take what they can get for their oil futures, and the dollar is going up in value, driving down the price of oil, because these futures are denominated in dollars. Everybody knows what dollars are worth now that the Bush junta has publicly crapped in its pants over the credit crunch, and all the smart players are going to get out of dollars as fast as they can, sending the US spinning towards Weimar territory. Got a wheelbarrow?
I could be completely cynical and conspiratorial and say gas will only be cheap until after the election, but somehow I don’t think this is being done to take pressure off the party in power. America matters a lot less to the rest of the world than we used to, and a lot less to the oil companies. It’s time to face it: we’re number two. On a good day. And yes, we’re going to see five dollar a gallon gas, and then look back on the good old days when we could get all the gas we wanted for five bucks a gallon; and, for all my attempts at preparedness, I probably won’t like it any more than you, dear imaginary reader. Enjoy yourself, grasshopper!