Envisioning a world of $200-a-barrel oil


Martin Zimmerman / LA Times | June 30, 2008

As forecasters take that possibility more seriously, they describe fundamental shifts in the way we work, where we live and how we spend our free time.

The more expensive oil gets, the more Katherine Carver’s life shrinks. She’s given up RV trips. She stays home most weekends. She’s scrapped her twice-a-month volunteer stint at a Malibu wildlife refuge — the trek from her home in Palmdale just got too expensive.

How much higher would fuel prices have to go before she quit her job? Already, the 170-mile round-trip commute to her job with Los Angeles County Child Support Services in Commerce is costing her close to $1,000 a month — a fifth of her salary. It’s got the 55-year-old thinking about retirement.

“It’s definitely pushing me to that point,” Carver said.

The point could be closer than anyone thinks.

Three months ago, when oil was around $108 a barrel, a few Wall Street analysts began predicting that it could rise to $200. Many observers scoffed at the forecasts as sensational, or motivated by a desire among energy companies and investors to drive prices higher.

But with oil closing above $140 a barrel Friday, more experts are taking those predictions seriously — and shuddering at the inflation-fueled chaos that $200-a-barrel crude could bring. They foresee fundamental shifts in the way we work, where we live and how we spend our free time.

“You’d have massive changes going on throughout the economy,” said Robert Wescott, president of Keybridge Research, a Washington economic analysis firm. “Some activities are just plain going to be shut down.”

Besides the obvious effect $7-a-gallon gasoline would have on commuters, automakers, airlines, truckers and shipping firms, $200 oil would drive up the price of a broad spectrum of products: Insecticides and hand lotions, cosmetics and food preservatives, shaving cream and rubber cement, plastic bottles and crayons — all have ingredients derived from oil.

The pain would probably be particularly intense in Southern California, which is known for its long commutes and high cost of living.

“Throughout our history, we have grown on the assumption that energy costs would be low,” said Michael Woo, a former Los Angeles city councilman and a current member of the city Planning Commission. “Now that those assumptions are shifting, it changes assumptions about housing, cars and how cities grow.”

Full article here.

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