Calm before the Storm

Peak Oil? You wouldn't know it. People are talking all over the place about the promise of tar sands, ethanol, and wind power. Gasoline is dropping in price. I had predicted before the summer that oil would hit $95 a barrel and gasoline $3.50 a gallon. Summer is nearly over. The price of oil at its highest was about $78 a barrel and right now it is struggling to hold onto $70; gasoline is tumbling rapidly from a high of $2.95 a gallon to today's $2.56 a gallon. Iran's dictatoriot Ahmadinejad seems all huff and puff like a wolf that can't blow the house down. There's been a war between Israel and Hezbollahia, cohabitant of Lebanon, but that appears to be blowing over. The far prognosis for natural gas is grim, but right now there is a tremendous glut of the stuff. Hurricanes? This has been a dud of a season. Only now are threats coming up, but the latest one, Ernesto, has diminished from a potential Gulf rig and refinery whacker to just another thunderstorm with rain and tornado threats here in Virginia. So where's the peak oil? Where even is global warming?

It's coming. We don't know exactly when, but there will come a time when the world will not be able to increase oil production. Someone at the recent ASPO convention says that will occur 1500 days from 2006 July 26 or so; that's in the year 2010. Others say 2008. When it happens, they say, only "tremendous demand destruction" will cause demand to meet supply. In the past few months, oil production worldwide has stayed steady at 84 million barrels per day, but some of that could be the result of refinery destruction. But it also suggests we may be nearing the peak. We have trouble with the Alaska pipeline, although half of it is back up. They say that Saudi Arabia is experiencing trouble trying to match oil output with its rhetoric.

So this makes us all feel uneasy. What to do now? Move to the city? Grow a vegetable garden in our yard? Buy a Toyota Prius or a bicycle? Move closer to work? Stock up on food? Is this a disaster or something? It will be, but not of the kind that stocking up for disasters will help, because it will be long lasting. My thoughts are that we should reduce our output - take out all that is unneeded for fulfillment in our lives. Cut the lights. Ride the bike. Take the train. Move to the city, or even better yet, to a self-sufficient urban village or cohousing project. We do what we can, and we will just have to see what happens.

Credit and debit cards at pumps could lead to disaster

How do I pay for gasoline? When I was a child, my father used to go up to a gas pump. A serviceman in a policeman hat would come out and put a pump in the gasoline tank. I would see the digits spin, until the terminate somewhere near $2 or $3. Then my father would pay the serviceman. When I got out of college and owned my first car, I would get gasoline on my own, getting out of my car and putting the pump in and pumping until it said something like $10. Then I would go into the establishment, which was now a small grocery or convenience store instead of a auto service station, and pay the $10. I would get gasoline like this all the way until well into the 21st Century.

Then a change occurred. I started getting out a card and sticking it into the pump. I now follow screen instructions, pumping in the gasoline, and getting a receipt. That is how much my credit or debit card was charged for the gasoline. Then I would drive away without having to go into the store. Usually the amount is now $25, or for my van, $45. How times have changed.

There is a danger here. As long as people went into the store or paid someone cash, higher gasoline prices would crimp people's desire to drive places. This would cause a needed decrease in demand, and a drop in gasoline prices. But if people are going to stick cards in machines and build up charges on a credit card, people are not going to conserve. The direct association between gasoline and money is no longer there. Drivers don't worry about money until their credit card bill comes.

And then people react in the usual way they react to credit card balances. They pay the minimum amount and interest starts accruing. If gasoline prices are going to be charged like this in an era of ever rising gasoline prices, this will cause serious trouble. People will keep charging bigger and bigger amounts as gasoline prices continue to go up. Demand will stay high, furthering bigger raises in gasoline prices. Eventually people will not be able to pay their credit balances, and bankruptcies and defaults will occur all over the place, and this could cause a string of bank failures. This could be exacerbated by inflation, causing the Fed to raise interest rates. In other words, we could have another Great Depression.

People need to start conserving now. Forget the credit card, and pay only with what you got. Else we are heading for a real monster of a financial crash.