Supply? Demand? Speculation? Falling Dollar?...

The debate continues: Why is the price of crude up over 80% year over year?

Does it matter??

Whatever the reason, the bottom line is that Americans are now paying around $3.50 per gallon of gasoline. What's more disconcerting is that an 80% annual increase in the cost of crude means, if it continues, that we will pay around $7.00 per gallon by this time next year.

Scary stuff.

Our food supply is nothing more than an exchange of hydrocarbon energy for caloric fuel. You don't have to be a rocket scientist to make the correlation between the rise in crude and escalating food prices.

Roughly 85% of our nation's electricity is provided by hydrocarbon exchange. If the price of fuel for your auto goes up, so will your electricity bill.

Thank goodness our leaders decoupled food and energy from the Consumer Price Index. If they hadn't done that, we'd be facing hyper-sonic inflation, wouldn't we?

I won't bore you any further. It should be more than evident by now that your life will change dramatically in the near future... IF... crude prices continue to rise at an 80% clip.

Meanwhile, please view blatently false assertions that rising gas prices represent only a small fraction of the family budget for what they are: nerve gas.

So the big question is... Are we going to see crude prices up another 80% a year from now?

It's probable... and the resultant shock to our way of life in the U.S. would be incalculable.

Supply

Field after field, nation after nation, and region after regions are reaching and passing their production peaks, and unable to deliver an increase in supply at any cost.

Demand

In the past, the U.S. alone could kill price through demand destruction. Those days are gone. Developing countries around the globe have more than enough appetite to consume what we leave on the table.

Speculation

If the real estate market is collapsing, the banks are freezing up, the government is hiding inflation, and it's difficult for your children to ingest precious metals... then, of course, there is going to be speculation. Can you blame anyone for buying food and energy futures?

Falling Dollar

Oil is transacted in US dollars only. Therefore, as the value of the dollar declines, we Americans continue to pay more and more for crude while all other countries continue to exchange their currencies for ever-increasing volumes of petrodollars.

All of the Above

For the average American, the actual battle no longer matters. It's all the same. The price is too high, the line is too long, and dollars in his pocket are vanishing in value.

Nothing will change in the near future for several reasons:

1) OPEC is refusing to tap their "all-powerful" reserve production capacities (at $120/bl, it is not foolish to wonder if they even exist);

2)the collection of non-OPEC oil producing countries are deep into perfectly provable permanent states of production declines;

3)India, China, and other rapidly developing countries stand more than ready to pick up any slack in crude supplies;

4)The de-coupling of the US economy from the rest of the world is happening much faster than many of us realize and we are not the 800 lb. gorilla of consumption we once were;

5)OPEC is not stupid, they are manning the production throttle closely as they shift gears away from the US economy and into those of the developing world;

6) OPEC countries do not love us.

None of these are good new.

Whatever the base problem is - supply, demand, speculation, falling dollar - there are even more powerful players still standing on the sideline. On the side of hope is Innovation; on the side of fear is Panic.

The future of world will be decided when these two clash.

Across the Great Divide

It's gone away - yesterday.
Now I find myself on the mountainside,
Where the rivers change direction
Across the Great Divide.

Nanci Griffith's song, Across the Great Divide (http://youtube.com/watch?v=7i2AFRX-z0I) has always meant a day in the future for me.

But no longer.

Yesterday, now gone away, was my 42nd birthday. It symbolically marks the passing of the first half of my life. Call it a personal "peak" if you will.

As of today, I now have no option to scale back up, or to even linger at the summit. I am compelled by the laws of life and time to begin the long, steady descent down the other side. After 42 years of incessant bickering and fighting, Gravity and I have settled the bulk of our disputes and thus pledge to work peacefully together - well... at least we've agreed that we're headed in the same direction.

What bothers me is that she finally got her way.

And so it is also with her sister, Entropy. She gets her way, too, only she's exceedingly pompous about her skills of persuasion. She'll promise an eventual breakdown of all things, and laugh all the while doing it.

And now my point...

With the exertion and expenditure of energy, both of these sisters can be subdued for a while. However, there comes that dreadful day when all peoples, animals, plants, and systems begin to gradually recognize their fate.

Somewhere along this line of cognoscence is where we stand as a collective human race. Oh sure, we've had random synaptic firings that preceded and eventually formed our 'hallucinatory' theories, but this time it's different.

We are recognizing our summit.

Given that the sisters always get their way, I propose that we make nice with them.