So here it is…

So call me a conspiracy theorist but here it is:   Why the fuck is the price of oil so damn high?!?  Like some sort of fever it just keeps going higher.  When will it stop and how much more can people take?  Fortunately there is a cure.  Unfortunately, its a long and painful withdrawal process.  From a national addiction to debt fueled by oil can we still change our government as a people? Or are we to remain junkies to the world, a democracy in name only where our own government is our dealer. 

From 1972 until 1978 prices of oil had shot up by almost 50% however that was dwarfed by the next accelerated spike in 1978.  For the next 8 years the price of oil on a nominal basis, which is measured against a constant currency value, drops in measured steps.  However on an inflation adjusted basis the drop is significant and steep.  The reason the two measures diverge during this period is inflation. 

   Let’s face it, the last time oil prices shot up lasted from ’72 to ’86 peaking around ’78.  The below chart is as of April 2008.  The price of oil at that time was $117 a barrel.  Today, June 20th 2008 the price of a barrel of oil is $135.  So what’s next? Does the price of oil come down as fast as it went up? Not so fast, because From 1978 to 1982 the rate of inflation averaged 11% and was as high as almost 15%.  As much as the price of oil will come down following the spike, so much more will everything else begin to cost.

   So here it is… when the price rises in oil come to a stop, don’t celebrate.  Look carefully because by then whatever is saved is lost on price increases elsewhere.  The great unspoken tax, levied through federal interest rate policy and US Treasury money supply controlled increasingly by executive powers which are bailing out the major banks at the expense of the American people.  Watch the money trail and notice who benefits and who suffers as the economy “recovers”. 

   A radical shift is needed which will stop the Fed policies of artificially low interest rates and stem the tide of money which the Treasury has let loose.  Until the government is stopped from bailing out the financial interests behind their politics, the American people will be robbed with a silent tax. 

   Will the cure be worse than the disease? As painful and financially damaging as price increases in the US will be, it is nothing compared with the effects in countries around the world.  The question remains if the US is still strong enough as a nation to take the necessary steps to start curing its national addiction.  Interest rates higher than most people under 30 years old can imagine and years of tough economic times are the cure.  Will the US be able to get clean? Probably.  Will the US be able to stay clean? Probably not, but it’s time to start trying.

inflation adjusted oil prices chart

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s