Oil Barons Continue to Rape U.S. Economy

According to Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University, gas prices have doubled across the nation over the last year, but for the rural lower income people -- as a proportion of their income -- the rise in gas is becoming very high, and for some, unmanageable.

On June 16, the U.S. nationwide price for regular unleaded gasoline reached an average of $4.08 – the highest price ever, and about a dollar higher than at the start of 2008. Nationwide, Americans now spend an average of 4 percent of their take-home income on gas. But in some areas people are spending more than 13 percent of their salaries to get around. That means gas expenses are now rivaling what families spend on food and housing.

Who’s Making Money Here?

Gas prices are as high as they are because they can be. I recently talked to an expert in this area and he and many other experts believe that as much as 60 percent of the price of oil is based on pure speculation from investors bidding up oil futures prices.

According to a June 6 article in the New York Times, a barrel of crude oil is now more expensive than it was in 1980, the previous peak, when adjusted for inflation. The oil and gas industry website Rigzone.com states the latest market rate topped $136/bbl as of June 11.

Venezuela estimate earnings of $75 billion in oil revenue in 2008, which is about twice their external debt. Venezuela has the largest energy reserves in the Americas and is the world’s fifth-largest oil exporter. According to officials about 1.4 million barrels are exported to the U.S. daily, but they still have 130 billion barrels in reserve; not exactly what you’d expect when there’s an “oil shortage.”

Likewise, oil companies are notoriously greedy, and the oil companies -- not the people running your local gas station -- have record profits. Exxon made corporate history with $11.7 billion in quarterly profit, as reported by CNN Money.com on February 1, 2008 – a 14 percent increase from the previous year.  

They reported both the highest quarterly and annual profits EVER for a U.S. company, boosted in large part by soaring crude oil prices. This even tops their previous record achieved in 2005 after hurricanes destroyed the Gulf Coast. 

They also set the annual profit record with net earnings of more than $40.6 billion in 2007. That’s about $1,300 of profit per second. 

And that’s just ONE oil company. The number two oil giant, Chevron, reported a profit of more than $17.1 billion for 2007.

Folks, never be fooled into thinking that the oil companies are forced to jack prices up this high because of crude oil costs; they are only benefiting from the run-up in oil prices. But don’t expect gas prices to go down any time soon. $4 a gallon gas is no doubt just the beginning. I see three, potentially interconnected, reasons for the current situation:

1. Oil giants are trying to make as much profit as possible before the world wizens up and switches to alternative forms of energy, and/or
2. We’ve reached “peak oil” where the global demand now exceeds global production, which will result in never-ending price hikes as reserves start to dwindle, and
3. Runaway inflation due to the Federal Reserve’s over-printing of money that isn’t backed by anything of real value

Rising Gas Prices is Just the Beginning of U.S. Financial Woes 

Rising oil prices affect so much more than just prices at the pump. Not only are you spending more on commuting, but prices on everything from groceries to tires, household goods and petroleum based personal products are also soaring.

Companies that make goods using raw materials derived from oil are trying to determine how to cope as well, opting between raising prices, shifting their production process to something less costly, or cutting workers. Many are doing all three.

For example, the tire giant Goodyear has raised the prices on its tires by 15 percent in just four months. Procter & Gamble have averaged an increase of 5 percent on its paper products and diapers, and Dow Company has hiked its prices as much as 20 percent across the board, which include wide-ranging products like paint, PC and television screens, mobile phones, light bulbs, paper and carpets.

Meanwhile, incomes are stagnating, and for many, disappearing altogether. Just last month the U.S. Bureau of Labor statistics reported a jump in the unemployment rate from 5 percent to 5.5 percent with the loss of 861,000 jobs in the month of May.

Where Do We Go From Here?

We are simply running out of excuses for not converting to safer, renewable energy sources that don’t turn the Earth into a toxic waste dump, and that doesn’t continue to push the population into financial despair.

And there are already many viable alternatives!

Harnessing the energy of the sun, for example, is now becoming a very cost effective alternative for homes and other buildings. The award winning Nanosolar Company has created a breakthrough solar coating, produced at an 80 percent reduced cost from previous years, which makes them a serious contender for consumer dollars.

My new office building, constructed for my practice and web team, will eventually be powered with Nanosolar electricity , and it seems obvious to me that this technology will allow us to not only radically lower our utility bills in the coming future, but do it without polluting our environment.   

Think about it: there is enough energy in the sunshine that falls on the earth in ONE HOUR to satisfy the energy needs of the entire human race for ONE YEAR. There’s simply no need for this over-reliance on oil that is now decimating the earth and financially destroying so many people’s lives.

I’ve also posted previous articles written by Darshan Goswami, retired from the U.S. Dept. of Agriculture where he headed the Department of Load Forecasting and Renewable Energy. Darshan Goswami brings up many good points and explains the viability of switching from a “Hydrocarbon Economy” to a “Hydrogen Economy,” thereby eliminating our reliance on foreign oil completely.

He believes that a Hydrogen Economy would eliminate many of the problems that the hydrocarbon technology has created, and offer advantages such as:

• The elimination of pollution caused by fossil fuels - When hydrogen is used in a fuel cell to create power, it is a completely clean technology. The only byproduct is water. There are also no environmental dangers like oil spills to worry about with hydrogen.
• The elimination of greenhouse gases - If the hydrogen comes from the electrolysis of water, then hydrogen adds no greenhouse gases to the environment. There is a perfect cycle -- electrolysis produces hydrogen from water, and the hydrogen recombines with oxygen to create water and power in a fuel cell.
• The elimination of economic dependence - The elimination of oil means no dependence on the Middle East and its oil reserves.
• Distributed production - Hydrogen can be produced anywhere that you have electricity and water. People can even produce it in their homes with relatively simple technology.
• Generate new employment - This new Hydrogen Economy will create a very positive impact on the world economy.

For more information about the use of hydrogen, I recommend reading Darshan Goswami’s articles listed below. 

What Can You Do Personally?