Americans Watching a Way of Life Disappear?
Yesterday, crude oil reached $126 per barrel for the first time. That is a 25 percent increase year-to-date, and it isn't finished. Search the web, and it is easy to find broad-ranging opinions pointing towards $200 a barrel.
This is a life-changing catastrophe for Americans. As gas quickly approaches $4.00 a gallon, we must start to grapple with the concept of gas at the pump costing $5.00 to $6.00 and up.
For me personally, I now spend $75.00 each time I fill my 2002 Ford Windstar. Every time I make a 20-trip, I need to tack on an additional $4.00 in fuel expenses. Moreover, how will I respond when I have to pay $175.00 to fill my vehicle each time? I won't be able to afford to drive it.
Unlike many Americans, I am still fortunate. Most of my required travel (work, church, school, etc.) is within a relatively short distance from my home. There are many, however, who travel 40 to 50 miles or more each way from their home to their workplace. That will add up quickly! What will happen when millions of Americans start spending hundreds of dollars every month just to get to work?
You will start to see a spill-over effect in many other sectors of the economy. As Americans watch their discretionary income dry up due to high gas prices, large segments of the economy will struggle. Simply put, Americans will not be able to afford many extras as they pour their hard-earned money into their gas tanks.
Unfortunately, there is not a quick, easy fix to this problem. Wouldn't it be nice to have cars that rely on clean, affordable electricity instead of gasoline? Wouldn't it be nice if the US had a high-speed rail network operating on Electricity (like Europe) that connects the major cities in every state?
The problem is easy to see: even if our government leaders made the decision to "fix" the problem next week (A "War on Foreign Oil Dependency"), the relief is years away. Meanwhile, the American economy will shrivel and die.
As a historian, I am always looking for parallels, and this one appears easy to see: the years 1928-1932. If I was Barak Obama or John McCain, I would find some good books on Herbert Hoover and his Administration and study the decisions they made during this critical time period in American history. Hoover was a good man, and in normal times, would have made a good president. Unfortunately for him, he was the wrong man at the wrong time. America's bill came due during his term, and we couldn't pay it. Moreover, the policies his Administration implemented in an effort to combat the economic crisis only exasperated the problem. Ten years of hard economic depression followed.
Like Hoover, whoever wins the 2008 presidential election will likely face a historic crisis during his term in office. Like America in 1930-32, we will be incapable of dealing with the problems that could confront us in 2010 to 2012. It will take a couple of years of real pain before Americans of all levels are willing to accept the inevitable change that has come upon them. It is in times like these that either greatness or evil will rise. The United States elected FDR in 1932; Germans elected the Nazi party to a majority in the Reichstag and Adolf Hitler became chancellor.
Regardless of what the future holds, it is likely we are watching a way of life Americans have enjoyed since 1946 come to an end. Our dependency on foreign oil is the root cause. We have enjoyed a carefree lifestyle for many decades, but now it's time to pay the bill.
References
$200 Oil Could Happen This Year - May 06, 2008
A Goldman Sachs analyst on Tuesday predicted that oil prices could reach $150 to $200 a barrel over the next 6 months to two years, but said that how far prices could climb still "remains a major uncertainty." Oil for June delivery hit a record of more than $120 a barrel Tuesday in electronic trading on the New York Mercantile Exchange. MSNBC
China Projected to be World's Biggest Auto Market by Middle of Next Decade - May 06, 2008
China boasts the world's second-longest highway system at 1.1 million miles and has seen its auto production rise quickly, from only 220,000 passenger cars in 1993 to 2.34 million in 2004, according to IBM. With millions of new Chinese purchasing their first automobile, the demand for fuel in China will grow exponentially. MSBBC
The Rise of a New World Order
In an interesting article in The Asian Times, Michael T. Klare highlights five forces merging on the world energy market that will create a "new energy world order." According to Klare:
The combination of rising demand, the emergence of powerful new energy consumers, and the contraction of the global energy supply is demolishing the energy-abundant world we are familiar with and creating in its place a new world order. Think of it as rising powers/shrinking planet.
This new world order will be characterized by fierce international competition for dwindling stocks of oil, natural gas, coal and uranium, as well as by a tidal shift in power and wealth from energy-deficit states like China, Japan and the United States to energy-surplus states like Russia, Saudi Arabia and Venezuela. In the process, the lives of everyone will be affected in one way or another - with poor and middle-class consumers in the energy-deficit states experiencing the harshest effects. That's most of us and our children, in case you hadn't quite taken it in.
The five forces Klare sees affecting us are:
- Intense competition between older and newer economic powers for available supplies of energy.
- The insufficiency of primary energy supplies.
- The painfully slow development of energy alternatives.
- A steady migration of power and wealth from energy-deficit to energy-surplus nations.
- A growing risk of conflict.
Klare's conclusion: the most pressing decision facing the next president and Congress may be how best to accelerate the transition from a fossil-fuel-based energy system to a system based on climate-friendly energy alternatives.
References:
- The Rise of a New Energy World Order by Michael T. Klare [Asian Times, April 17, 2008]
- For analysis and discussion on Klare's article refer to The Financial Sense Newshour for April 26, 2008.
Paradigm Shift
What does the economy and soaring oil prices have to do with educational technology and the church? If oil prices continue to climb, and the cost at the pump starts to hit $4.00 per gallon, $5.00 per gallon, and up, then the U.S. is in for a major paradigm shift unlike anything this generation has witnessed.
Recently, I visited with a couple of missionary friends who are serving in Western Europe. Fuel in Europe hovers near $9.00 a gallon! At this price, all decisions are funneled through the lens of cost per mile. You can no longer afford to travel 30 miles for a meeting, class, or Bible study. Here in the U.S., high fuel prices are impacting the cost of food and transportation, but as of this writing, the cost per gallon isn't slowing consumer travel.
In a church setting, we are already discussing how high fuel prices could impact ministry. Grace Church (where I serve as pastor of adult education) is a regional church. We have families who travel as far as 45 to 60 miles each way to attend church. Many of our families travel 10 to 20 miles each way. Multiply this times the number of trips each week families attend church, and you have an average of 50 to 150 miles each week per family.
Right now it's not a problem. If gas prices tripled, however, it would be a problem. We would have to rethink how we do everything.
To start, we would have to rely much more on a home church model of ministry. We might be able to bring everyone together to one central location for a weekly service, but multiple trips a week to the church would probably be too costly. As a result, many of the connection opportunities would have to take place in homes.
Second, we would need to place much more emphasis on training and teaching via the Internet and digital video or audio. Many of the classroom functions that happen now at the church would need to be moved to the digital classroom.
Third, we would need to enhance our social networking capabilities as a church to keep the church members feeling connected and plugged in to the mission and vision of the church.
This, of course, is only a microcosm of the larger problems facing the U.S. as the cost of energy slowly transforms our culture. As John Loeffler observed on a recent Financial Sense Newshour:
... these higher prices also means there is a great wealth transfer that’s taking place from energy-deficit countries to energy-surplus countries. But that also means power. Power always follows the money flow and I don’t think we have seen anything like this in world history before. This is a radical paradigm shift that’s occurring right before our eyes. And again, on the geopolitical scene, you don’t see that reflected in politicians’ eyes – not just in the US but in reading what’s going on in Europe they haven’t grappled with what this means yet. [Financial Sense Newshour for April 26, 2008]
OPEC President: $200 Oil on the Horizon?
Reuters is reporting this morning that the cost of oil could hit $200 per barrel. Citing a story in the Algerian government newspaper, El Moudjahid, the news agency quoted OPEC President Chakib Khelil saying, ""In terms of fundamentals, stocks are high, demand is easing, supply is satisfactory. Therefore normally, without geo-political problems and the fall of the dollar, the prices of oil would not be at this level.
He added: "The prices are high due to the fact of the recession in the United States and the economic crisis which has touched several countries, a situation which has an effect on the devaluation of the dollar, and therefore each time the dollar falls one percent, the price of the barrel rises by $4, and of course vice versa," he was quoted as saying in brief remarks to journalists on Sunday.
Only a few months ago economist were predicting the return to $40 per barrel oil. Today, with the price per barrel close 20 percent higher this year alone, I am watching for oil to hit $125 per barrel within the next few months.
America is Neither Invincible Nor Immortal
Here is an excellent article by J.R. Nyquist from Financial Sense.
http://www.financialsense.com/stormwatch/geo/pastanalysis/2007/1126.html
The American Republic is neither invincible nor immortal. At present, the Republic is sick. There is much amiss:
No great figures appear on the national stage;
The populous is distracted and the pundits are blind to the great and ever-present danger of a repetition, on a bigger and more deadly scale, of the madness of 1939-45.
An entire generation has grown up without any knowledge of what those years actually signify, or of what the preceding years of 1929-1939 signify.
The American people are no longer unified, nor do they think of themselves primarily as Americans; neither do they agree on fundamental principles. In fact, a significant percentage of the population is foreign. Some are resident aliens, while up to 15 to 20 million are illegal aliens.
As a “people” Americans are caught up with entertainment and consumption. While citizenship and patriotism still exist, they are significantly attenuated.
As a territory, the national border is a joke. The political authorities do not have the will to police the border to the degree required for effective security.
As for the government, it is too often the puppet of various special interest groups – environmentalists who seek to destroy key domestic industries, ethnic leaders who divide and conquer by exploiting grievances, lobbyists who represent companies seeking to trade with foreign enemies. The old statesmanship and statecraft is gone.
The United States of America is more fragile today than it was in 1861. It is more fragile than at any time since the adoption of the Constitution. It is fragile because the country’s psychology, ethnic makeup, ideology, intellectual acuity and morality have undergone a revolution for the worse. Technology has changed the way we receive and process information – by removing detail in favor of “the grand sweep” (with moving pictures and sound). Technology has changed the relationship between man and woman. It has changed the relationship between parent and child. Karl Marx once said that religion was the “opium of the people.” And what if “the people” can get their hands on real opium? And so they do – in America. There is a pill for everything. There is a pill if you are fat, a pill if you are sad, and a pill if your child doesn’t behave in class. Such are the epiphenomena of convenience, America’s special highway to Hell.
The inward decline of America is already a “done deal.” The cataclysmic consequences are yet to occur. Be prepared. A time of troubles is coming. Capitalism is about to become a whipping boy once again, together with the unfortunate salutation: “We’re from the government, and we’re here to help.” Statism is part and parcel of America’s sickness. If we think government is too big now, just wait till the crisis worsens. Consider the following formula: The more government does, the less the economy has. With regard to the present mortgage crisis, or the soon-to-occur banking crisis, the taxpayer is twisting on a hook. Only he doesn’t feel the pain yet. It takes pain a long time – years in fact – to travel from the politician’s beatitude to the taxpayer’s mangled trunk. When the taxpayer cries out there will be new beatitudes, new hooks and more twisting. In this way a crash becomes a slump, a slump becomes a depression, and the taxpayer becomes a pauper. If mortgage lending is falling off, the government cannot rectify the situation. But watch them try, and watch them make a worse mess than you can imagine.
On Saturday the Associated Press ran a story with the headline, “Mortgage Failures Could Create Nightmare,” by Joe Bel Bruno. The story quotes Bill Gross, who runs the world’s largest bond fund: “We haven’t faced a downturn like this since the Depression.” Bruno also quotes Mark Patterson, a hedge-fund specialist: “We’re nowhere close to the end of the collapse.” In this scenario, capitalism would not be the only whipping boy. Uncle Sam and “American Imperialism” would be right up there, in the crosshairs. Even now, the rising socialist dictator in Venezuela wants OPEC to use oil as a weapon to “curb imperialism.” This radical anti-capitalist message hardly appeals to the sheikdoms of the Persian Gulf. But one day, the anti-capitalist mentality that prevails in many countries and in many American universities might win a disgruntled majority at the polls.
The main anti-capitalist player on the world stage is the Kremlin (together with its partner, China). Russian planners have been waiting for a U.S. economic crisis for decades. They have long schemed to exploit such a crisis. But exploiting the economic downfall of a great power is dangerous. The great power could lash out. In fact, Soviet military textbooks long ago warned of capitalism’s warmongering circles and the last gasps of imperialism. It is therefore important to be vigilant from the outset. One week ago, Russian President Vladimir Putin warned that Russia’s nuclear forces were ready to “repel any aggressor.” He publicly accused the United States and its allies of a military buildup on Russia’s borders.
What are we to make of this? It is palpably ridiculous. The United States doesn’t want war with Russia, and doesn’t plan any aggression against Russia. Accusing the United States, however, comes directly out of the Soviet playbook. Putin’s game is therefore the same old game – the Great Game.
A Soviet bloc high-level defector named Jan Sejna, writing in 1982, said the Kremlin’s long-range strategy hung on a future economic crisis in the West. “The Soviet view,” Sejna explained, “was that during Phase Three [of the plan] Capitalism would suffer an economic crisis that would bring Europe to its knees. This crisis would stimulate the influence of ‘progressive’ forces….” In September 1967 Secretary Konstantin Katushev of the Soviet Central Committee explained to the Czech Communist leadership: “If we can impose on the U.S.A. the external restraints proposed in our Plan, and seriously disrupt the American economy, the working and the lower middle classes will suffer the consequences and they will turn on the society that has failed them. They will be ready for revolution.” With remarkable prescience, Katushev told his Czech colleagues that American technology would contribute significantly to future economic destabilization. He correctly predicted that in the future, due to technological advances, unskilled American workers would find it increasingly difficult to make a decent living. “This phenomenon,” said Katushev, “is one I consider the United States cannot deal with.” There was a danger, he admitted, that the United States could “swing violently to the right.” However, the American governing elite, he said, is “fundamentally liberal in their outlook,” so the revolution should be won by the left.
Time will tell.