Wednesday, June 25, 2008

Oil: While Congress Slept: Green Agenda for Suburbs?

Since World War II North Americans have invested much of their newfound wealth in suburbia. It has promised a sense of space, affordability, family life and upward mobility...But as we enter the 21st century, serious questions are beginning to emerge about the sustainability of this way of life. With brutal honesty and a touch of irony, The End of Suburbia explores the American Way of Life and its prospects as the planet approaches a critical era, as global demand for fossil fuels begins to outstrip supply. World Oil Peak and the inevitable decline of fossil fuels are upon us now...The End of Suburbia, Oil Depletion and the Collapse of the American Dream, promotion for documentary End of Suburbia

Maybe Congress isn't sleeping after all. Maybe, as the Democrats listen to the Greens more than to you and me, what they see, as this doomsday "documentary" suggests, is that refusing American companies the right to drill for American oil is a way of realizing the Green Dream, all of us jammed into cities, no more cars, no more highways, no more intrusions on the lands that Greens feel belong to them or to a favorite minority.

National Public Radio, a lefty favorite for public relations, had a story about James Howard Kunstler, whose project End of Suburbia is, recently.

Kunstler says that big cities will become more population-dense at their centers and along waterfronts, but they'll essentially contract as people move to smaller cities and to towns. "Places that will be successful in the future are places ... that have some kind of meaningful relationship to food production, because we're going to have to grow a lot more of our food locally," he says. "The age of the 3,000-mile Caesar salad is coming to an end."...The End of Suburbia as We Know It?, National Public Radio/The Bryant Park Project

Who is James Howard Kunstler? Well, in the late 1990s, he was a leading fearmonger regarding Y2K. Remember that? Check it out. All the computer systems on Earth, for want of two digits in the date field of records, were going to suddenly transfer us back to January 1st, 1900.

In June of 2005, Kunstler predicted that the DOW would fall to 4000. See it here. It rose to 12,500.

You may be getting a picture of a slightly moonmad, leftist Jeremiah, a type with a long history in the United States. Generally, Congress doesn't listen to people like this. But, since the Republicans fumbled the ball in 2006, Congress is listening now. Why would that be? What possible value could a doomsday soothsayer have in a Senate hearing?

There is a basis for what Kunstler says that needs paying attention to:

If oil prices do stay high, how will this affect the real estate market? The conventional wisdom says -
* Demand will be higher for houses in the city and close to public transportation.
* Energy efficient housing will go main stream and there will probably be more tax breaks.
* Interest rate may move higher long term, as higher fuel prices feed inflation.
* Suburban sprawl will slow down over the long term.

I think these are all accurate predictions - if oil keeps going higher - but if history is a guide, I think it will be a while before we see any of these predictions come off in a major way. Oil prices were around $90 per barrel at the beginning of the year, so we have had almost a 50% increase since then. The question is whether the prices will continue to climb and, how far will they go. My guess is that we will have higher gas prices long-term, but there are reasons to think that prices will come down some first, and that we will get used to higher prices.How Will High Gas Prices Affect the Chicago Area Housing Market? Peter Thompson, Chicagoland Mortgage Insight, June 2008

This housing and mortgage analyst's key point: We will get used to higher prices. That's true if we can get past the panic induced by the doomsayers, political manipulators, assymetric warriors, and ETF speculators (see above). Why would we get used to the change?

This is one that Congress doesn't like to talk about. Why? Let's play a favorite game of economics analysts. Let's describe relationships over time.

Median Income-----Price of Gasoline
1970-- $ 8,734-------------$ .36 cents a gallon
1990-- $29,943------------$1.16 a gallon
2000-- $39,973------------$1.17 a gallon
2008-- $46,326------------$4.68 a gallon (est.)

*Sources: Wikipedia,

In thirty-eight years, median income measured in actual dollars has risen 530%. The price of gasoline has risen 1300%. In terms of the value of 1970 dollars, the relative price of gasoline today is 88.2 cents, high, but lower than it was in 1973, when gasoline reached a dollar a gallon for the first time. In real terms, i.e., proportion of income, gasoline is more expensive but not prohibitively so. It only seems that way because those responsible for the radical decline in the value of the dollar want you to concentrate on $4.68 instead of on a dollar that's worth less than 10% of what it was in 1970. In fact the real story in the changing price of oil (even with the panic/speculation factor included) may be that, in terms of the price of oil (or any other commodity), real median income has declined.

Missing these points is what the Greens depend upon their agenda. The conflation of agendas (see above) to produce a panic in real estate and energy could be defused if we'd all pay better attention to such things as the real value of the dollar.

Read above and below for more on what exactly this crisis is. It strikes this writer as one contrived to meet political and financial agendas unrelated to the availability or to the price of oil.



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