-By Rick Norris
During a May 7th interview on the CNN Glen Beck program, oil industry analyst Byron King suggested the possibility of $200 per barrel of oil by October of this year. Be prepared for shocks in places other than at the gas station.
As the cost of oil increases daily, our national security is affected significantly. For instance, Clayton B. Reid writes in the March 2008 issue of NewsMax that, “…for every $10.00 per barrel increase, US Air Force fuel costs rise $610 million per year.”
At three gallons per mile for an Abrams tank one can only guess at the increased costs for our armored forces. Operational costs for all the services just for getting from point “A” to point “B” are set to increase at an alarming rate solely due to fuel expenditures. Costs for heating or cooling living quarters on military posts and stations in the U.S. and around the world will also rise accordingly.
In the civil sector, Virginia Power announced an 18% increase in monthly home heating and air-conditioning bills to begin this summer. That translates to an approximate $40.00 monthly average increase for home owners. And that’s at the current cost per barrel of oil – let’s say $125 per barrel.
Costs for moving agricultural commodities from the field to the kitchen are rising daily. That does not include increases in the cost to farmers for fertilizers and pest control. A loaf of bread will no longer cost $2.50.
Some additional ramifications of the rising cost of oil for U.S. businesses and consumers, according to Byron King: the number of domestic commercial passenger air carriers will be significantly reduced within the next couple of years at current fuel costs. Added to the potential problem of reduced air travel due to increased cost is the lack of adequate rail transportation available in the U.S.
King also points out one of the unintended consequences from increased fuel costs: Businesses will be forced to make cuts in expenses such as health care insurance and force employees to depend more and more on government-funded programs.
While King does not discuss the issue of domestic tourism, principally a service industry, many Americans will be hard-pressed to afford a travelling vacation any significant distance from their homes.
Other areas that should expect major increases in costs will be individual transportation, home construction, and clothing manufacture.
In Urban areas supported by surrounding bedroom communities, such as New York City, Los Angeles, Chicago, Washington, D.C., the cost to workers just to get to and from work will seriously rise. The current cost of a gallon of gas in northern Virginia is in the vicinity of $3.60 per gallon. Less than a year ago the cost was closer to $2.00. Some federal employees in the District of Columbia commute from W. Virginia and Pennsylvania on a daily basis; others travel from closer locations such as Virginia but their travel costs are also high. What will the cost per gallon be when the price per barrel goes to the level King predicts? Household budgets will require major revision or commuters can start riding bicycles—fat chance!
The fact is that sans air travel, adequate mass transportation in the U.S. is virtually unavailable between major cities (ridden a Greyhound lately?) and in fact, within many major cities, should workers decide to avail themselves.
Home-building materials are heavily dependent on oil as a major component in their fabrication. Those materials include roofing, vinyl siding, insulation of all types, flooring — including fibers for carpeting — and for vinyl tiles used in utility rooms, and other locations in the home; the list is not exhaustive.
Or, how about petroleum-based fibers used in fabric production for clothing? Nylon, rayon, etc., are petroleum based. In short, petro-chemical industry costs are set to soar. How will clothing retailers react to increased costs for finished products? Reversion to natural fibers or leather is not feasible. First, not enough cotton or sheep are around to outfit the world. Second, PETA (wring your hands) will hemorrhage.
We know, specifically, why our country arrived at this point. Anti-nuclear power troglodytes were nearly successful in destroying that industry. Fortunately, the trend seems to have been reversed with as many as half-dozen or more nuclear- powered generating stations are either on the drawing boards or under construction. Hand in glove with that effort has been a successful 30-year program that halted the domestic construction of petroleum refineries; and, the prohibition of drilling for oil off of any U.S. coast, the Gulf of Mexico, or in the Alaskan National Wildlife Refuge (ANWR). Nearly all the efforts to curtail these activities have been the work of liberal politicians all in the name of “votes.” Yet none will take individual or group responsibility for putting the nation at such risk as it faces today from our Chinese “friends.”
Their solution has been “alternative” forms of energy production; wind power, ethanol, alternative non-polluting fuels. None, at this point, appears able to supplant traditional forms of power production and it takes some 10 years to bring a new oil field on line; it will take time to bring new nuclear power stations and new refineries into phase. Location of those facilities is a major problem that revolves around those who say NIMBY. Or in the case of Massachusetts Senator Kennedy, a wind farm will spoil the ocean view from his summer home in Hyannis port.
Back to the premise: the effect on national security. Higher cost to maintain our military will accrue. Subsistence costs for food, clothing, shelter and transportation are set to increase for all households at a rate not previously seen.
Our logistics networks cannot sustain the increased cost of fuel without passing those increases on to the government and to you. If costs were to be increased over a longer period of time, years, rather than at the compressed rate we see occurring today, weeks/months, the economy would adjust concomitantly. That is not the case and the country will not long withstand that kind of increase in the basic costs for living. Of course there is a possibility that prices will decrease when the demand is reduced. But, if Asia continues at the present rate what is the possibility of that? (Nothing is fair in this world!)