Thursday, July 22, 2010

The Stupidity Rolls On

The economic news is grim. Unemployment is near 10% and the meager recovery appears to be stalling. There is good news, however. Auto sales are picking up. Well, certain vehicles are selling well. The big gas-guzzling ones.

Sales of SUVs and trucks are up 24% this year. As long as the vehicle burns a gallon of petroleum every 14 miles or so it is selling well.

It has been 2 years almost to the day since fuel prices rocketed to over $4 a gallon. You would think Americans would have learned a lesson from the warning shot over the bow. But I guess not. Americans want big honking, gas-guzzling vehicles even if it destroys thier finances, puts the economy and their job at risk, or causes another spike in fuel prices.

To understand the depth of stupidity involved here we need to review some facts:
  • Since 1981, worldwide consumption of petroleum has exceeded discovery of new reserves every year. Think about this sobering fact for a moment. If it doesn't run a shiver down your spine you have other issues to address.
  • In 2008, worldwide consumption of petroleum was 31 billion barrels; new reserves discovered were 9 billion barrels. Do you feel that shiver again?
  • Oil production peaked in 2005.
  • To get the oil that remains requires very deep water drilling. How is that working out in the Gulf of Mexico?
  • Oil prices are double from a decade ago while we are mired in a deep worldwide recession. How can oil run upwards of $70 a barrel when demand is so low due to the economy? Could it be...
  • When the economy improves, and it will improve, demand for oil will climb. Without additional reserves available gas prices could soar higher than ever.
Is it just me or do the above facts, coupled with SUVs, sound like a really stupid idea?

I am making a prediction, so remember, you heard it here first. When the economy really starts growing, gas prices will race past $10 a gallon, and will probably hit $16 - $18 a gallon... before 2015.

Then we head right back into a recession. My only hope is that the people that squandered the resource are the ones that lose their job. Why should the responsible pay for the actions of idiots.

I am not hopeful.

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