Everywhere I turn, I read and hear about $200 oil in the near future (here’s one recent example, from somebody who should know better, here’s another from hyperinflation guru Gonzalo Lira, and here’s another from historian Niall Ferguson. Investors are being sucked in, too, and at least one
pundit fool has jumped the shark, calling for $350 oil by July of this year. And of course Jeff Rubin is still banging this drum). The per-barrel price of crude oil might hit $200. But I doubt we’ll know about it, since the lights will be out before we get there: Considering the fragility of the industrial economy, I cannot imagine we’ll have fuel at the filling station, food at the grocery store, or water coming out the taps within a few months of oil hitting the $140 mark.
And we might not break the $120 mark, considering the impending hard landing for the Chinese industrial economy (improperly termed a black swan here) and the associated reduction in demand for crude oil. We might see Dow zero before the per-barrel price of oil hits $140. Whether oil soars or China swoons, the race to the bottom is on, with 2011 looking a lot like an ugly version of 2008 for the industrial economy.
Even the vaunted killing machine known as the U.S. military, with its essentially unlimited budget for bodies and technology, cannot maintain the flow of crude oil into the country. Military and political constraints are slapping the U.S. around already, and we’ve only begun to fall off the oil-supply cliff. A bunch of those military personnel and contractors are about to find themselves stuck in unfriendly territory without so much as a bicycle or fraudulent passport to aid their escape.
The oil-price trigger on which most folks in the echo-chamber are focusing is turmoil in the Middle East, and the demise of the Kingdom of Saudi Arabia certainly could accelerate a price spike. But, as I’ve pointed out before, we’re due for a spike this year even without unrest in the Middle East. That’s what declining global extraction rates (e.g., Iraq) and increasing global demand does to the price, even if our vaunted military manages to conquer Libya for its oil. Even Forbes knows what most media outlets are afraid to reveal: Saudi Arabia, the world’s largest exporter of oil, has no spare capacity.
Or maybe this time is different, and a spike in the price of oil won’t bring the industrial economy to its knees. The ever-clueless cabal of economists at The Economist suggest an oil shock this year will transform the world economy. I agree about the transformation, though not in the direction they think.
In response to the good news about skyrocketing oil prices, the U.S. Central Intelligence Agency finds itself in an uncomfortable position. Seems one of their spooks killed a couple of the wrong people in Pakistan, and subsequently was found with embarrassing documents in his possession. The documents indicate we’re trying to “ignite an all-out war in order to re-establish the West’s hegemony over a Global economy that is (sic) warned is just months away from collapse.” So the best measure we can come up with, in terms of preventing collapse of the world’s industrial economy, is to provoke global nuclear war? That’ll almost certainly slow the warming of the planet, but I’m still unconvinced it’s a good idea. Talk about curing the disease by killing the patient.
Although western pundits have completely misjudged the situation in Saudi Arabia, a big war hovers even without meltdown of the kingdom. So predicts noted trends forecaster Gerald Celente , financier Marc Faber, and former Goldman Sachs technical analyst Charles Nenner. World War III would be quite a sequel to the final Super Bowl.
That big war might take American minds off the ongoing global insurrection, which otherwise is coming to the United States, in part because of our capitalism-for-the-poor, socialism-for-the-rich political system (also see this analysis at Zero Hedge). Alas, that’s one of the many consequences of expensive oil and food, not to mention horrific inequities between the wealthy and the rest of us: riots.
On the other hand, we might not need the war to destroy ourselves. Ongoing nuclear issues aren’t restricted to Japan. Rather, the entire Pacific Rim is vulnerable. This is the stuff of nightmares, and it haunts my waking hours, too: a nuclear event, whether or not it results from war, and the subsequent release of radiation into the atmosphere.
As the industrialized world comes apart at the seams, I’m about done waiting for people to get it. Increasingly, it’s becoming a matter of waiting to see it get them.
Next-day update: Upon request, I submitted a brief essay to Transition Voice yesterday morning regarding the disaster in Japan. It’s on their website today.
This essay is permalinked at Island Breath.