Exclusive to OpEdNews:
OpEdNews Op Eds

The Oil Panic of 2008

By (about the author)     Permalink       (Page 1 of 1 pages)
Related Topic(s): ; ; ; ; ; , Add Tags Add to My Group(s)

View Ratings | Rate It

opednews.com

- Advertisement -
Like any panic, the root causes are always disputed; heroes are vilified and villains deified. Some say the root cause is the ever-expanding, worldwide demand for oil, exacerbated by the emerging economic tigers India and China. Others point to oil traders' and speculators' involvement, and even the traders themselves find they are torn by their allegiances. CNBC's Michelle Caruso-Cabrera took umbrage at a Congressman for describing oil company profits as obscene. Explaining that most of their viewers are investors and view profits as a deserved expectation, "What then, Congressman, makes profits obscene?" she asked. "What makes profit obscene?"

That's loyal to the cause. Her counterpart, Joe Kernen, described the oil traders by saying, "I hope that they are happy with their fat wallets as they destroy the American dream!" And that's what makes a panic a panic, traditional alliances are out the window. Last Monday, T. Bone Pickens speculated that oil could reach $150 a barrel by the end of the year. Wednesday, European traders said $200 a barrel by the end of the year, as the mix begins to swirl like a squirrel in a blender.

The third possible cause is that the Bush administration, by allowing the dollar to free fall, has been a using the dollar's fall to kite the war costs by repaying lenders in devalued dollars. The flip side is that, as the dollar's value falls, oil costs rise and so you then have speculation on both ends.

Gerard Arpey, chairman and CEO of American Airlines, said last week at the annual shareholders meeting, "The U.S. airline industry, as it is constituted today, was not built for $125- or $130-per-barrel oil. The industry will not and cannot continue in its current state." The fact that four more airlines have liquidated this year and one is operating in Chapter 11 is clear evidence of that fact. The answer for American is to sell off aircraft and reduce capacity to slow the bleeding. Estimates are that fuel increases will cost the airline industry $15 billion in additional fuel costs, this in an industry with around $23 billion in cash.

Pick your poison; let the fuel costs kill you or raise fares until the public stops flying. But the airlines are the canary in the coal mine for the trucking companies, food processors, freight haulers and producers of raw materials. A factory that I used to order from gave us free freight on orders over ten thousand dollars. That deal is now out the window. With freight rates up 40%, the ten thousand-dollar order wouldn't cover their own freight costs. That, in turn, lowers margins and encourages dealers to order only as needed.

What about the long-suffering mass transit systems across America, long the red-headed stepchildren of Republican administrations? How will they keep the buses running as fuel prices double? How about the cities themselves? How will they foot the increased fuel bill for police, fire departments and ambulances? That's why I like CNBC, they don't try to hide their bias, in fact they revel in it. They are proud of being money-grubbing slugs as they drop into the conversation, "The dollar a gallon rise in fuel prices will cost the average consumer $600.00 a year."

First, how do they figure a dollar rise? It's more like a dollar and a half here and rapidly heading toward two dollars. Even if we accept the one dollar figure, that's $832 buying one tank a week, at two dollars it's $1,600 per year, and for the average consumer that's not recoverable, except by a massive change in lifestyle. No vacation, no more soccer practice, no more soccer, no more a lot of things. Because the one thing that's for certain is that wages won't rise. Home prices are in free fall so who would build a new home with market uncertainty and rising material costs due to fuel increases?

That's what makes Ms. Caruso-Cabrera's question so poignant, as she knew when asking it that there is no pat answer. A loan shark and a banker are in the same business, it is only by degrees that they differ. A soldier and a murderer do the same job as well, only one is regulated and ordered, the other subjective and capricious, yet both do the obscene. It is only by degrees that we honor one and hang the other. But the question is also telling, selling life jackets to the highest bidder on a sinking ship is just smart capitalism then, isn't it?
- Advertisement -


Moving the factory to China or India is just good business, but how quickly they turn about. Arch-conservatives like Joe Kernen are suddenly outraged as oil speculators are destroying the American dream! But Joe, it's just good capitalism, the religion of self-centeredness. Oil speculators make a profit and everyone else suffers. So quit your whining, that's the way capitalism works. What did they tell the people in the rust belt? A period of short-term economic difficulties. Well, sit in it, Joe. Soak it all in, we've been here for years and we'll share it all with you.

Many of the conservatives, like Cabrera, say build nuclear plants or drill in the Arctic as solutions to these problems. The idea is to use the smoke of panic to allow others to profit and thereby save themselves and their own American dreams. Unfortunately, America has been pursuing a failed energy plan for the last seven years. We were to be greeted with flowers and candy and it would all be over in a few weeks and the oil would flow like water from a tap. So what happens when you make a bad investment? What happens when you bet on the wrong horse?

The administration has been scratching their ass and winding their watch, as they don't have a clue as to how to pay for this biggest boondoggle in American history. The President threatens to veto any legislation that helps real estate speculators while the Treasury and the Federal Reserve do just that. The pouring of easy credit into Wall Street, because if Wall Street goes, the dollar goes. The savvy investor sees that money isn't to be made in banking or in real estate on Wall Street anymore, too many losses, too much volatility.

The inflationary spiral is obvious but ignored by Orwellian government statistics. Inflation less food and energy? How about John Kennedy less open car and gun shots? Statistics meant to hide the truth, truth by omission by the incidental lie. A panelist on CNN reported that her neighbors weren't going to drive to their summer home outside of Boston every weekend this year like they did last summer. Gee, me neither, poor baby, but the example makes the point of how the media tries to stifle real suffering in America. To trivialize and marginalize the crisis until it becomes indecipherable.

The administration borrows billions to fund the war. The Federal Reserve keeps interest rates low to foster the image of a healthy economy. Wall Street runs up flush with tax-cut cash and invests in banking as a traditionally safe investment. The banking industry jumps into the sub prime market with both feet as well qualified borrowers are becoming obsolete due to stagnant wages. They bundle and sell the loans with a 'what, me worry' attitude.
- Advertisement -


As the US economy begins to falter, the dollar begins to slide and oil begins to rise. The administration does nothing, they are benefiting from the slide, Laissez les bon temps roulez! Let the good times roll, as even Ben Bernanke claims that this helps the economy. Except that oil is the most basic commodity import; as oil prices rose and the dollar fell, why not invest in oil futures? A good hedge against inflation, a tightly-regulated market, a limited supply, a capitalist's wet dream!

So, you are left with the outraged Joe Kernen conservatives, whose ox has been gored, and the unrepentant Cabrera who cries, More! The transnationals with no obligation to anything but themselves and their profits. Who see in America a cash cow, who hold no obligation to land or the farm, exempt from the pain that they cause and who scream the loudest when they feel in the least. But in the words of Bob Dylan, there's a hard rain gonna fall.

This will be the legacy of terrible policy, fraudulent economics and the voiding of the social compact with the American people. A compact forged after the last time America put the fathers of greed in charge, a compact that, if not renewed and re-founded, will make America unsustainable and its government illegitimate. Good economies build good societies, tyrannical societies build only tyranny, predatory societies build to an explosive velocity.

 

I was born and raised in Chicago in a liberal Democratic home my Grandfather was a labor union organizer my Father a Democratic district committeeman my Mother was an election judge. My earliest memories were of passing out Kennedy yard signs from (more...)
 

Share on Google Plus Submit to Twitter Add this Page to Facebook! Share on LinkedIn Pin It! Add this Page to Fark! Submit to Reddit Submit to Stumble Upon


Go To Commenting

The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of this website or its editors.

Writers Guidelines

Contact Author Contact Editor View Authors' Articles
- Advertisement -

Most Popular Articles by this Author:     (View All Most Popular Articles by this Author)

Fair Tax: The Mother of All Dumb Ideas

Baby Boom Gone Bust

I Know ! Let's Rape Grandma!

Masjid Al Hedaya and the American Dream

The Non Americans

The Flat Tax is Flat Stupid

Comments

The time limit for entering new comments on this article has expired.

This limit can be removed. Our paid membership program is designed to give you many benefits, such as removing this time limit. To learn more, please click here.

Comments: Expand   Shrink   Hide  
1 people are discussing this page, with 1 comments
To view all comments:
Expand Comments
(Or you can set your preferences to show all comments, always)
You nailed it.... by John Sanchez Jr. on Monday, May 26, 2008 at 8:03:52 AM