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Black Gold; The End of Oil:

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Good morning Middle America, you’re King of Simple News is on the air.

U.S. NEWS: As oil passed the $125 mark like a freight train passing a bum, what are the remarks being heard at the pumps and on the news, but “This is ridiculous.”

What is really ridiculous is that America didn’t plan for peak oil; that point in time when supply and demand would have a head on collision. But as I’ve reported both in this blog and in my book, it sure wasn’t that we didn’t know it was coming. We’ve known it since 1956.

Some like to point out that since King George took office, that oil has gone from $32 to $125 and it must be his fault. We could write a book on the things that are Bush’s fault, but peak oil isn’t one of them. Remember in econ 101 where the first page of the text explained the effects of supply and demand? So do I.

I watched an oil expert on the financial news last night as he gave his take on the situation. He was a tall guy with nice hair and an expensive suit speaking very confidently. He said, “OPEC could be doing a whole lot more by increasing the supply and I’m getting sick and tired of their not doing so.”

Let me translate that last statement for you. “The U.S. doesn’t have enough oil to go around and we want the people who do have the oil to get on the stick and make it cheap again. After all, don’t those people know that we are accustomed to SUVs and Diesel motor coaches?”

Those people with the oil are similar to those scalpers outside the Super Bowl with the last ticket to the game and cheap is not a word that comes to mind.

The world is running out of oil and the U.S. runs on oil…not a pretty picture. I have a friend who for more than 30 years has both drilled and owned interests in oil wells. Yesterday he told me that he has purchased a large gas tank with a pump on it to have at his home. You can take that any way that you want…I suggest that you take it seriously.

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When we were visiting about the inflation being created by the cost of oil, my oil production friend mentioned that paving highways may well become nearly cost prohibitive.

The asphalt product and the process of laying it down consumes massive amounts of oil. So what did I read in my local newspaper last night? “Budget cuts force CDOT to shift into maintenance mode.” The cause for halting most construction was reported as the staggering price of oil and falling revenues.

Look around you, all that you see uses oil in some fashion, if nothing else, motor fuel for delivery. There is no known substitute for the 82,234,918 barrels of world oil used daily. The U.S. with our 4.8% of world population currently uses 25% of that oil.

The U.S. can only supply around 25% of our current oil needs; the remainder is purchased from foreign nations. The price is set by world demand, not by demanding lower prices. It isn’t our oil.

Setting aside the differences of those who support and oppose drilling in ANWR, from a supply basis, it would be like putting a band aid on a bullet wound.

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Oil is only the first of our global natural resources to begin to show weakness in supply. Thankfully our leaders have a solution…each and everyone of them promise growth and greater consumption.

 

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www.kingofsimple.com
Mike Folkerth is the author of "The Biggest Lie Ever Believed" and is not your run-of-the-mill author of finance and economics. The former real estate broker, developer, private real estate fund manager, auctioneer, Alaskan bush pilot, (more...)
 

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