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| There Will Be Blood (Miramax Films) |
Giordano Bruno
Neithercorp Press
The prevalence of crude is undeniable. You might dabble in green-think cultism or you might drive an obnoxious monolith of a Hummer (what I like to call an “overcompensation-mobile”), but neither philosophy of consumption dares to contradict that this world runs on oil. Petroleum is used in the manufacture or shipping of almost every industrial product on the planet, and even many agricultural goods. Therefore, it behooves the public to seriously consider the ramifications of oil price and its underlying effect on the entirety of our economy. Even minor increases holding over an extended period of time cause economic reverberations that can be felt for years afterwards. Financial and social adjustments to commodity inflation can sometimes take decades if the event is historically unprecedented. Petroleum is a foundation ingredient, it is energy itself; the higher its cost, the greater the cost of every other product we use, and the worse off our financial structure is. Period. There is no scenario yet experienced by any nation in which oil inflation actually benefited the masses or the overall economy, even in countries that sell oil!
Americans have had a small taste of the tensions involved in an oil crisis, during the 1979-1980 Iranian snafu, and the massive gas spike of 2008, but these events are nothing compared to the steamrolling inflation we are soon to see at the pump in the next couple of years. Let’s examine why…
OPEC Ready To Let Oil Run Wild
At the writing of this article, oil stands at around $91 a barrel, still below our prediction during the summer of $100 by the end of 2010, but already a 30% increase over the $70-$75 average we enjoyed in the middle of the year. Anyone who believes that prices will even out or fall over the course of 2011 should take note of the heavy press coverage on the statements from OPEC representatives over the past couple months. The Middle East has made it quite clear this winter that $100 a barrel is not just possible, it is a certainty:
http://www.reuters.com/article/idUSTRE6BN16A20101225
The illusion underlying the OPEC statements, however, is that the current price rise is completely under their control. This is not the case. In fact, the nearly $150 a barrel plateau we witnessed in July 2008 will seem like a quaint memory not long from now, primarily because the factors involved in today’s petrol valuation are much more systemic and violent; rooted in a snowballing devaluation of Western currencies, instead of the traditional influences of supply, demand, or even speculation.
The recent comments of Kuwait’s oil minister that “the global economy can withstand $100 oil” are, of course, also disingenuous on a couple levels. First, the global economy is in dire straights and riding the wave of a convoluted “recovery” built on fiat and fantasy. $100 oil will only bring the illusion crashing down as the public realizes the true effects of long term inflation in prices, and the sales of goods begin to falter even further than they already have. Second, oil will NOT stay at $100 for very long, so the suggestion that we can “withstand” such a price is rather irrelevant. Essentially, OPEC is losing its ability to reign in or stabilize gas at a reasonable cost due to the crumbling dollar, and so, they have decided to raise rates to offset dollar devaluation while attempting to change the definition of what “reasonable cost” is. They admitted as much back in October:
The key here is the dollar and its inevitable demise, which the establishment is trying desperately to hide until the last possible moment. Over the next year we are likely to be buried in a deluge of excuses, half-truths, and lies, all meant to divert attention away from the word “inflation” as the masses begin to question just what the hell is going on.
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