Thursday, September 20, 2007

What peak oil has to do with us.

The latest economic information is not encouraging at all, I'm sorry to say. The credit crunch caused by the adjustable mortgage meltdown continues to grow. Also, I have added a new chart to my little collection below on the right, and copied it here so you don't have to go hunting for it right now:



The farther away your favorite items are produced, the more their price has gone up. The farther away the component ingredients of your favorite items are produced, the more the price has gone up. The more out-of-season items you want from foreign countries, the more you will have to pay for them - thus, the double-digit inflation taking place in the price of most products (and single-digits for all the rest). Here, for example, is what's happening with milk:




Which should, if the government was being honest, reflect a very steep jump in the real inflation in the last couple of years. But look at the latest report:

Consumer Price Index Summary:

FOR TECHNICAL INFORMATION:
Patrick C. Jackman (202) 691-7000 USDL-07-1400
CPI QUICKLINE: (202) 691-6994 TRANSMISSION OF
FOR CURRENT AND HISTORICAL MATERIAL IN THIS
INFORMATION: (202) 691-5200 RELEASE IS EMBARGOED
MEDIA CONTACT: (202) 691-5902 UNTIL 8:30 A.M. (EDT)
INTERNET ADDRESS: Wednesday, September 19, 2007
http://www.bls.gov/cpi/

CONSUMER PRICE INDEX: AUGUST 2007

The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.2
percent in August, before seasonal adjustment, the Bureau of Labor
Statistics of the U.S. Department of Labor reported today. The August
level of 207.917 (1982-84=100) was 2.0 percent higher than in August 2006...


If you're wondering why the strange difference between the government's reports that inflation is only 2% or so, and the reality that the price of some groceries has doubled in the past year, and all groceries are more expensive than they were, this is why. Your friendly government double-speak experts think if they don't tell people that inflation is near to running away, that people somehow won't notice that their grocery budget has ballooned upwards lately. This is directly due to shipping rates for the past year or so having soared due to peak oil.

So by simply ignoring or mis-stating the real issues involved in consumer pricing, the government is able to make this entirely inaccurate claim with a straight face. But out here in real life, if you have done even a tiny bit of regular shopping over the past two years, you know better.

And it's not just groceries, of course. It's everything that isn't made in your own local area, to a greater or lesser extent. And there's no end in sight.

OPEC - Total crude oil production of the OPEC cartel decreased by 80,000 b/d to a level of 30.16 million b/d, from July to August, according to the latest estimates of the IEA. Natural Gas Liquids production increased with 20.000 b/d to 4.82 million b/d, from June to July, according to the IEA. The average total liquids production in 2007 up to August has been 35.12 million b/d, which is 593,000 b/d lower than average 2006 production of 35.71 million b/d...

And they're not withholding or purposefully obfuscating production - they need the income just as much as we need the oil. They have reached the limits of what they can produce but demand continues to skyrocket. The price has nowhere to go but up.

"We're at a crossroads, he says; climate always changes, but humans are now pushing the change, rather than reacting to it, and changes are starting to speed up. We're facing a choke-point in oil production where we can't increase supply to meet growing demand any more..." Ian Dunlop, Society of Petroleum Engineers of AIME (USA).

Things are not going to get better anytime soon, class - if they get better at all. Now is the time for some serious financial housecleaning. If we don't get things under control now, it will be impossible to do so later. I don't know about you, but I can't just wave a magic bracha and make more money appear in my bank account each payday. I have to work out a budget that can accommodate a serious hike in the price of groceries and household goods. And so do you.

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