Archives: 2008 June

What happens to an America built on cheap energy when energy is no longer cheap? It’s a question that most Americans do not want to confront. Especially the slick talking politicians.

The fact is most of the way America was built depends upon cheap energy supplies. The love for the automobile, the vast suburbs that surround America’s majors cities, the neglect of a high speed railway system, huge suburban shopping malls and office parks, American agriculture with its dependence upon fertilizers, pesticides, and massive diesel fuel driven combines and tractors, the aviation industry, and the trucking industry, all were constructed on the back of cheap energy.

Now that energy is not cheap what will happen to the American lifestyle? Optimists look towards the development of alternative energy sources. Some of these possible aids to the energy crisis will be helpful, such as solar and wind power, and some will be counterproductive, like ethanol production using corn as the energy source. However, in time the optimists will learn that we are nowhere near to replacing a significant percentage of our total energy needs with alternative energy sources. Time is already up. We are going to have an energy shortfall and the energy that we do have will be very expensive.

We live in a world designed for cheap energy inputs and energy is no longer cheap. We are already transferring hundreds of billions of Dollars a year to oil producing nations with no end in sight. America is going broke. American citizens will be feeling the pain of this fact for a long time to come, perhaps from now on as the American standard of living drops as expensive energy pricing takes its toll.

Byron King writing for The Daily Reckoning picks up this point…

“The returns are coming in from the distant precincts of the oil patch, and the winner is… Oil!

“The price for oil has barely budged based on the Saudi Summit. There has been no summer sell-off, and I’d be surprised to see a significant pullback as the summer driving season kicks into gear. (Followed by hurricane season, and then the buildup for winter heating stocks, followed by winter.)

“What’s going on? Well, what the Saudis give – in proposed, future increased production…the Nigerians take away – with ongoing oil patch carnage that forces the likes of Shell and Chevron to close vast pipeline systems. Apparently the present trumps the future, even in the futures markets. Everything is connected to everything else, isn’t it?

“Here is my take on the exit polls from the Saudi Summit…

I saw a CNN special presentation last night that had as its title, “We Were Warned – America Out of Gas. The same holds true for the airline industry. They were warned but except for Southwest Airlines and perhaps one or two others, like Jetblue, the highly paid executives were too busy enjoying their perks to listen up. Now, they are in fact paying through the nose for jet fuel with no end in sight.

And how about the American automotive industry? Did they heed the warnings? Just look at all of the suddenly unwanted SUV’s and trucks now accumulating at dealerships. It took gas prices near $4.00 a barrel to wake the public up and to cut into that SUV demand. The executives produced a lot of SUV’s because they were high profit models and the nearly mindless public could be convinced that they just had to have one to stand out from the crowd. Then as gas prices mover ever higher the SUV buyers found that they had purchased a vehicle that the crowd no longer wanted.

In the CNN special there was a very interesting segment featuring Sir Richard Branson, the founder of Virgin Airlines. Sir Richard was quite straightforward in his assessment of the energy situation. He stated that the shocks to the world financial system will be greater than the combined effects of World Wars One and Two combined. To try to save the day he thinks that, quite correctly in my opinion, it will take a huge emergency effort on the part of world governments, by industry and the public. He is not at all sure that we will have enough time to move to alternative energy sources before time runs out and we are at nearly empty.

Any period of disruption in oil supplies to the American economy will cause a huge decline in business activity. The airlines will be at the forefront of the devastation but almost all businesses and our very way of life will be affected. Just think of the huge travel industry that will be affected as airline travel is reduced. Hotels and spas, travel agents, taxi drivers, restaurants, gift shops, duty free shops, airport workers, all will be hurt along with countless other businesses as the financial fallout cascades into the economy.

The airlines are already taking a series of unpopular steps in a desperate effort to stay in business. Airlines are retiring older more fuel inefficient aircraft and reducing their fleet sizes. They are reducing the number of flights. Almost all of the airlines are downsizing and reducing the size of their workforce.

In addition, airlines have raised fares and will continue to do so. They are also nickeling and diming passengers to death by charging fuel surcharges and by charging for checked luggage and for everything else including soft drinks and peanuts. Forget about meals if you are flying economy class.

Lara Logan appears on Comedy Central with Jon Stewart and slams American Media’s coverage of the wars in Iraq and Afghanistan. She feels even with the American public tired of the wars after five longs years that is no excuse.

She uses the recent battles in Sadr City as an example. According to Lara there were 12 to 15 hour pitched battles in heavily populated urban areas that hardly got a mention in the American media.

Yes, Americans may be tired of hearing about the war but how much do they really know about what is going on in Iraq and Afghanistan? And how much do they really want to know?

What is needed is for every member of the Bush administration and all members of congress to spend a month in Iraq and Afghanistan. And not in a highly protected cushy hotel in the Green Zone but embedded in an American combat unit. After a few weeks of making the rounds with the soldiers and marines perhaps a few accurate stories of how our troops really spend their nights and days would make it back to the American media.

War is a dirty, brutal business. If more of our leaders and public truly realized just how brutal and dirty perhaps we would be less inclined to engage in war.

Tweet This Post