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High Oil Price = Faster Economic Decline For America

The American Dream
Jan 18, 2011

Most Americans have no idea how important oil prices are to the overall health of the U.S. economy.  Whenever oil prices have pressed toward record levels in recent decades, it has always resulted in an economic downturn.  A high oil price does not just mean that consumers will have to pay a little more at the pump.  The truth is that oil is the very lifeblood of our economic system.  We have built our entire country around the concept that we can transport lots of stuff very long distances for a very, very cheap price.  When that paradigm beings to change, it fundamentally alters the dynamics of the U.S. economy.  A high oil price will mean an even faster economic decline for America.  The cost of oil factors into everything.  A high oil price means that transportation of products and services costs more, travel costs more and energy costs more.  It means that consumers will have less disposable income.  When the price of oil goes up it benefits the big oil producers and a few others, but for everyone else it is very painful.  But perhaps even more importantly, because the U.S. has to import such massive quantities of oil, whenever the price of oil goes up it means that we are becoming poorer as a nation because even more of our money flows out of the country and into the hands of the oil barons.

According to the U.S. Energy Information Administration, the United States consumed a grand total of 6.9 billion barrels of oil during 2009.  That represented approximately 27 percent of the total oil consumption of the entire globe.

Unfortunately, the U.S. imports over half of the oil it consumes, and this represents a massive transfer of wealth out of the United States.

Just think about it.

Every month America imports massive quantities of oil which we rapidly consume.  At the end of the month we are left with nothing.

The foreigners that sell us all the oil end up with a big pile of our dollars.  Yes, eventually those dollars are going to be worth a whole lot less.  But for now they are using them to build gigantic palaces, they are constructing some of the most outlandish shopping malls and hotels imaginable, and they are even setting up “indoor ski resorts” in places such as Dubai.

Meanwhile, many formerly great American cities are being transformed into rotting hellholes.

Every single month we send the giant oil producers of the world billions of our dollars in exchange for the oil that we are deeply addicted to.

It is kind of like a rich young man that is rapidly going broke by blowing all of his money on a drug habit.

We’ve just always got to have more, more, more and it is draining more of our national wealth out of us every single month.

Sadly, the truth is that the United States has absolutely huge untapped reserves of oil that the “powers that be” will not let us touch.  It turns out that certain interests are making insanely huge profits by keeping America addicted to foreign oil.  The ultra-wealthy and ultra-powerful people that are involved in doing this to us are destroying our nation economically just so that they can profit.

It is absolutely sickening.

So does any of this money that we ship off to foreign oil producers ever come back to the United States?

Well, yes, there are a couple main ways that it comes back to us.

One way that it comes back is that it gets loaned back to our government.  The U.S. government has now borrowed hundreds of billions of dollars from the top oil producing nations around the globe.

Remember, the borrower is always the servant of the lender, and we are rapidly becoming servants of the big oil producing nations.

Another way it comes back to us is when sovereign wealth funds from nations such as Saudi Arabia, Kuwait, the United Arab Emirates and other major oil producing nations buy up huge chunks of our infrastructure.  These giant sovereign wealth funds are buying up highways, ports, toll roads and even parking meters from coast to coast.

So the next time you pay a toll, that money might be heading straight to the pockets of some fatcats in the Middle East.

Doesn’t that just make you feel warm and fuzzy?

In a recent piece for Rolling Stone, Matt Taibbi described some of the U.S. infrastructure assets that these sovereign wealth funds are buying up….

A toll highway in Indiana. The Chicago Skyway. A stretch of highway in Florida. Parking meters in Nashville, Pittsburgh, Los Angeles, and other cities. A port in Virginia. And a whole bevy of Californian public infrastructure projects, all either already leased or set to be leased for fifty or seventy-five years or more in exchange for one-off lump sum payments of a few billion bucks at best, usually just to help patch a hole or two in a single budget year.

America is literally being sold off piece by piece.

We are slowly becoming owned by foreigners.  We are slowly being transformed into paupers in the land our forefathers conquered.

Not only that, but a high price for oil will only cause this incredible transfer of wealth to accelerate and it will likely crash the entire global economy once again.

Already the U.S. economy is teetering on the brink of disaster.  If the price of oilhits $100 or $120 a barrel it could be enough to set off another huge economic slide.

According to Sabine Schels, a commodity analyst at Merrill Lynch, whenever the size of the energy sector reaches 9 percent of the global economy it spells big trouble….

“It was in the 1980s and it was the same in 2008. Right now we are at about 7.8 percent and if you go above $100 per barrel to $120 per barrel, you get to that 9 percent level.”

But it isn’t just the rising price of oil that is causing the cost of gasoline to go up.  All over the country, states that are facing massive budget shortfalls are raising gas taxes.  Many state officials believe that since consumers don’t actually “see” the higher gas tax on their receipts that they won’t be as angry as if state income taxes were raised.

Well, that may be true, but what they are failing to realize is that a hike in gasoline taxes is one of the most economically damaging tax increases that can possibly be imposed on their citizens.

Another consequence of a high oil price is that it means that the price of food all over the world will be very high.  In some areas of the globe, even a minor increase in the price of food is enough to threaten the survival of millions.  If the price of oil gets up around $140 or $150 a barrel, it is likely to set off food riots that will make what is currently going on in Tunisia and Algeria look like a Sunday picnic.

But right now, many of the big oil producing nations of the world are openly welcoming the arrival of $100 oil.  Iran, Venezuela and Libya all say that there is no reason for OPEC to act even if oil hits $120 a barrel.

And guess who says that they now have the biggest crude oil reserves in the entire world?

Venezuela.

That’s right – Venezuela now says that they had certified deposits of 297 billion barrels of oil at the end of 2010.

That certainly puts a larger target on their back, doesn’t it?

In the years ahead, the demand for natural resources is going to continue to intensify.  It is going to be one of the dominant economic trends during the coming decade and beyond.

The United States should be much further along in developing alternative energy sources, but up to this point big business and the U.S. government have been openly repressing many promising technologies.  Whenever anyone comes along that could seriously upset the status quo they are bought out or squelched.

So because of all of this corruption we are all going to pay the price.  There are plenty of untapped oil reserves inside the United States.  There are plenty of alternative energy sources that we could be developing.  But we have been kept completely and totally dependent on foreign oil and now rising oil prices are absolutely going to devastate our dying economy.

Things did not have to turn out this way.

But guess what?

They did.

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