Month: June 2022

No, not in the old Cold War thinking.

As I was setting up the BBQ for Summer cookouts. I grabbed the Propane canister and gave it a good shake. It was about half full.

“Oh, I should go have this topped off,” I thought.

Then I thought about the gas in my car and thought, “I should probably fill the tank too.”

Then I thought about the price of gas and how much it was going to cost me. Almost $100, Damn! That’s a lot of cash. I decided to wait on both.

These thoughts inevitably led me down the road to petroleum and the economy in general.

I honestly can’t think of a single factor that has more control over our whole economy with more far reaching effect than petroleum cost.

We’ve all been feeling the pain at the gas pump. Many of us use gasoline on a daily basis. If we’re lucky we only fill up once a week or less. (I’m in the less category thank goodness.)

But it’s not just gasoline.

Jet Fuel is derived from Kerosene (petroleum). If the price of Jet fuels go up, then so do the prices of passenger tickets and air freight.

Kerosene is also used to heat homes in the North East. Even in the South when I was a boy, we had a 55 gallon drum in our backyard. Every fall, the Kerosene man filled the drum and if it was a cold winter he’d come back again in December or January. The big Kerosene heater in the hallway of the house was a center of activity on cold mornings. We’d have our coats draped over it for a few minutes to warm ‘em up before heading out for the day.

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Diesel Fuel (petroleum) has seen prices skyrocketing in recent months too. We’re all familiar with Diesel. It fuels the 18 Wheelers that deliver almost all the goods we depend on to our shopping centers, grocery stores, gas stations, etc. If it costs more, then so do our goods.

That’s a simple equation to get your head around.

What’s easy to forget about Diesel is all the other things that it powers.

Most ships for example. Not just your fancy Cruise ship. But those big assed cargo carriers that deliver cars, and manufactured goods, from China and the rest of the world. Yes, even those big oil tankers are powered by Diesel.

Then there’s the fishing fleet. You know, the fishermen that catch Salmon, Tuna, Crab, Lobster, and Shrimp. If their fuel prices go up, so does the cost of your Summer Seafood festival.

Most farms use Diesel to plow the fields, run irrigation pumps, harvest the crops, dry the grain, and ship it to factories to make bread.

Cattle Ranches, Chicken Farms, Dairy Farms, and all the rest are dependent on Diesel to run the heavy equipment like skip loaders, and backhoes. Some may use Diesel generators to run heaters in the Winter so food animals don’t freeze to death before they’re ready for market. Then they transport those animals to slaughter houses using Diesel trucks.

Even the railroads are dependent on Diesel. Most of the locomotives use big Diesel generators to power big electric motors that drive the locomotive, carrying goods all over the country.

Cranes, bulldozers, Cement Mixers, Dump Trucks, and all manner of construction equipment use Diesel fuel to level the ground for new housing developments, and raise girders for skyscrapers. Those same machines are used to make roads and maintain them. Snow plows, garbage trucks, school buses, and lots of city buses use Diesel fuel to provide necessary services.

Given that Diesel fuel prices have doubled in the past year it’s reasonable to expect for the cost of all these goods and services to go up as well. Or the services will be curtailed to maintain profitability and the ability to make payroll for the entities that provide them.

The practical upshot is that everything will become more expensive. From a box of Cheerios to that slice of ham in your lunch pail.

It’s not just fuel either. The ink in your ball point pen is oil based. Kiln drying of lumber will become more expensive, adding to the cost of lumber. Which in turn adds to the cost of construction.

Plastics of every type become more expensive from the plastic tub your cream cheese comes in, to the wrap the butcher puts over ground beef in the meat section.

Recycling plastic, (Only about 50% efficient,) while a good thing, has an interesting effect. With each recycle, the quality of the plastic goes down. This implies that there is a finite number of times a plastic wrapper or container can be recycled into useful life before it ends up in a trash dump.

Ultimately, new plastic wraps or containers will have to be made from petroleum, and the increased production costs will be seen by the consumer as higher prices.

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Even fertilizer is petrochemical based. Making fertilizer more expensive will either translate into higher food prices or shortages. A lot of farms run on very tight budgets. An increase of 1% can mean that the fields in the north 40 don’t get planted.

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President Biden has said,

“When it comes to the gas prices, we’re going through an incredible transition that is taking place that, God willing, when it’s over, we’ll be stronger and the world will be stronger and less reliant on fossil fuels when this is over,”

Well, he’s right about one thing. This is a transition. I don’t know if I’d call it incredible. I also found his choice of the words, “…the world will be stronger and less reliant on fossil fuels…” to be odd.

I’d characterize his statement as reckless domestic policy. However, America is not the world…

Thinking about the rising petroleum prices and our government’s hand in those price increases domestically, I have to ask.

What are they thinking?

If the idea is to force America off a petroleum based economy this isn’t the way to do it. First and foremost, the infrastructure isn’t ready for this miracle transition.

It’s almost as if the Administration is thinking about automobiles only, and neglecting to consider the overall impact of their energy policies.

I for one don’t buy into blaming Russia for our energy prices. On the first day in office President Biden took steps to thwart American energy independence and his administration hasn’t stopped since.

All the Biden Administration has succeeded in doing is kicking our economy in the balls, while it was trying to get up after the COVID lockdowns.

In a way, this could be characterized as a “Shadow” lockdown. I know I’m traveling less. I’m staying home because I don’t want to spend the cash on fuel.

All of my household errands are planned to minimize travel and maximize the return on driving. (In truth, this is not terribly different from my normal way of doing things.) What I have noticed is that I’ll put off making a trip to pick up something I need for a project until I’ve got to get several items in the same general location.

That, replicated across millions of households also has an effect on our economy. Couple this behavior with people tightening their belts, the unavailability of some products due to production or supply chain issues, and I start to wonder if people may be simply choosing not to purchase things. In effect making do with what they’ve already got or going without entirely.

That could have far reaching economic implications over time.

Just in housing, we know that recent reports state housing starts are down. But we know that more people are coming to this country who will need to be housed. The cost of my little house has jumped by almost $100,000 (According to Zillow estimates) in the past two years.

That kind of price increase will certainly exclude a number of home buyers from the market. Especially if the cost of living and interest rates continues to squeeze those buyers from both ends.

Rental costs are skyrocketing too. The rental cost of an apartment alone begs the question; How are thousands of people with limited skills streaming into this country going to afford a place to live? Even if the government, A.K.A the taxpayers subsidize these folks living arrangements?

Many of these folks are arriving with no jobs, few skills, and no transportation. While at the same time, this country is generally built around everyone having a vehicle.

When factoring the cost of used vehicles, increasing food prices, along with the gas prices to power them, how are these folks supposed to make it?

I can understand people wanting to come to this country because of the “Dream” of America. The harsh reality of what is happening due to poor government policies is another thing entirely.

It’s been said that midterm elections are a referendum on the current administration. If that is true then the upcoming midterms should be a bloodbath. The question is, will the administration get the message?

Will Washington D.C. understand that the unintended consequences of their actions have been far more devastating, and potentially longer lasting, than an actual attack on our country?

I suspect that the baby formula crisis is only the tip of the iceberg.

“Winter is coming,” as was said so often in Game of Thrones.

This upcoming winter may be long, cold, and deadly. I say that seriously.

Each year we hear of the elderly freezing to death because they can’t afford heating oil. We hear of people being found dead because they used a charcoal BBQ inside to heat their homes. What happens if food supplies run low, while simultaneously more people are forced to curtail their heating expenses? Will this become a starve or freeze situation?

Just how “green” is it having people going into forests cutting down trees to feed their fireplaces?

How will this country react if desperation reaches a level of “Survival, Cancels out concepts like Right and Wrong”?

The die may well have already been cast. Planting season is well underway. Decisions about how many fields to plant and with what crops have already been made. Cattle and poultry production schedules have been set based on current cost and anticipated cost to the ranchers.

All of these producers have to make profit to feed their families too.

Grain reserves may provide a buffer this winter. But by next spring, if nothing is done to address fuel costs, and with it supply chain issues, the following winter may be really hard.

How many Americans is this administration willing to lose in their incredible transition? How much destruction to the economy will this administration do, or idly stand by and watch before they take action?

Only time will tell.

I will not be surprised if soon the Mexican and Canadian Governments have to set up checkpoints to process a sudden influx of migrants trying to get into their countries.

The Canadians already have pretty strict immigration controls in place. The Mexico side of America isn’t too worried about people coming into Mexico. Since most people are trying to get into America they’ve left a lot of the worry to America’s Immigration and Border patrol.

I find myself sometimes wondering how Mexico will react if suddenly, the flow of immigrants reverses? What happens when / if people who’ve come to America decide that it’s not all it’s cracked up to be and head South for a better life lower fuel costs, lower cost of living, less regulations, and a warmer climate?

What would that look like? Would the Mexican army suddenly be patrolling their side of the border?

I’m not trying to be depressing, or depressed. These trains of thought sometimes start in my head and once started, have to run to their conclusion.

This one started with me shaking a propane canister on Memorial Day, in preparation to grill a couple of burgers.

This time next year, I might have lost the 10 pounds I’ve been wanting to lose and Memorial Day lunch might be a couple of wayward rabbits seasoned with rosemary or wild sage.

A lot can change in a year. I hope whatever change comes, it’s for the better.