This article by William F. Buckley will put a damper on your normally sunny disposition, but we do need to be aware of what hazards lay ahead:
Raymond J. Learsy has written a book memorable in the special sense that nightmares can be memorable, but also useful. If the nightmare is that you died of an overdose of drugs, and the memory of it causes you when in command to draw back from the marginal dose, then the nightmare has served a purpose. Raymond Learsy writes (his book is called Over a Barrel: Breaking the Middle East Oil Cartel ) about what could happen if we continue to go as we are going. The price of gasoline as I write is 60 percent higher than it was a year ago. Such data require extrapolation....here is what we might be facing if oil rose to $100 per barrel.
I paraphrase the author: Commuters suddenly forced to pay double for a gallon of gas begin to brown-bag their lunches, inching away from restaurants and sandwich shops. Americans who can still afford a vacation go on shorter trips, putting a major dent in the tourist industry. Trucking companies hauling everything from wines and spirits to furniture to automobile parts impose a hefty surcharge on shippers, who pass it on to their customers, who then pass it further down the line to the retail buyer if they can.
The crunch forces many truckers to sell their rigs, playing havoc with both cross-country and local shipping. Higher fuel costs send the Postal Service deeper into the red and threaten the survival of rival package shippers FedEx and UPS. With the break-even point for airlines a distant memory at $31 a barrel and carriers already operating with skeleton staffs, sharp fare boosts are the only option. Traffic spirals into a tailspin, and one airline after another declares bankruptcy.
But of course, oil is vital to everything from plastic picnic forks to printer's ink to asphalt. Manufacturers raise prices across the board, and potholes go unfilled in city streets around the nation. At first, municipal and factory employees lose overtime, then they are laid off or fired outright.
Foodstuffs of every kind - from beef in the butcher case to fresh fruits and vegetables in the produce aisle, to milk and cheese in the dairy section - reflect the higher costs incurred by growers and shoppers.
Runaway prices on just about everything take the Federal Reserve Board by surprise. Determined to keep interest rates low and dulled by their own assurances that inflation is somnolent, the Federal Reserve's governors are ill-prepared for the economic crisis. The Fed belatedly boosts interest rates a full 2 percentage points.
The heretofore unheard-of move jams on the economic brakes so swiftly and so sharply that you can almost smell the stink of burning rubber. Higher mortgage rates stop would-be home buyers dead in their tracks and cast a pall over the building industry. The real-estate market crashes almost overnight, wiping out billions of dollars of paper profits and putting holders of adjustable-rate mortgages and home-equity loans in peril. Foreclosures and tax-default auctions become common, consumer spending dries up, and soon the entire world is in a recession.
The rise in oil prices is not a fancy of Ray Learsy, and the unpredictability of that rise manifestly requires self-protection. How? Again, paraphrasing the author:
First, we must cut back energy usage by taking steps to control demand (just as OPEC works to control supply).
Second, we must become energy self-reliant.
We should use the Strategic Petroleum Reserve (700 million barrels) to douse incendiary shoots of inflationary fire. Those uses of national oil would be loans, not grants, repayable in kind when the price of oil has stabilized.
We will need to encourage alternative energy sources while adopting a voucher-based gas-distribution program. For the duration of the emergency, gas users will have access to magnetic debit cards in which are embedded a national quarterly target of per-consumer gasoline. Drivers whose allotted amount of gas doesn't meet their needs can buy part or all of someone else's allotment. For the average driver, this distribution plan would not increase gasoline costs. A consumer would pay the same out-of-pocket cash per gallon, and the government wouldn't get its hands on any more of the taxpayers' dollars. It is a more efficient way of distributing energy because it employs market incentives to allow heavier gasoline users to get what they need without increasing overall consumption of energy.
It was 20 years ago that the Saudis and the United States arrived at a deal. The Saudis would set prices so as to protect the U.S. oil industry. And the U.S. would protect the Saudis' independence. We regret that, and should make the Saudis regret it also.
Actually, it seems that Buckley and Learsy are understating the dimensions of the calamity high oil prices will wreak. If energy prices go ballistic there will be a world-wide economic depression that will almost certainly lead to war, perhaps on a global scale, as nations contest with each other for access to fuel. Such a war will almost certainly wind up going nuclear as one side or the other begins to prevail.
Have a nice day.
