“Dearer to God are the prayers of the poor,” go the words to a sturdy old Anglican hymn.

Well, at $138+ per barrel of oil, I think we are about to find out how dear those prayers really are. This, plus the impending agricultural disaster due to low planting levels and other bad weather, will spell impoverishment for large swaths of the American middle class.

In the US, the poor and working poor are already marginalized. Now, with the ongoing melt-up in oil prices the middle class is being financially suffocated.

Recently wholesale gasoline prices went up 33-cents. No typo. That’s 33 cents, in two days. So let’s round it out and add another $500 to the annual gasoline bill to operate one average automobile in the US of A. If you are a two-car household, make that number $1,000. Just from a two-day spike. And that does not count the impact on diesel (killing trucking & agriculture) and jet fuel (killing airlines).

We are seeing the rapid evisceration of the guts of the US economy. We are seeing the beginnings of an Energy Recession, if not an Energy Deprsssion.

Back in the Great Depression of the 1930s, it was different. There were ample natural and energy resources, but the factories were closed. There were factories, of course, but the workers were laid off. There were workers, but no one could afford to hire them. The banks had failed due to lack of funds. Overall there was just not enough money priming the pump to get things moving.

Problem now? The resources are depleted. Many of the factories are gone and not replaced. Indeed, we have a manufacturing-averse culture in many respects. (The faux-environment movement has not helped.) Our educational system has produced a lop-sided labor force, such that there are critical skills shortages all thorugh key parts of the economy (like energy…).

And there’s too damn much “money” floating around. Actually, it’s just excess US currency in the form of credit instruments. Much of it has floated into the hands of people who are not “us.” A few key resource-producing areas, along wiith overseas governments and sovereign wealth funds, have control over immense levels of global cash flow. With the rapid runup in energy prices they are draining the daily capital out of the US.

So the overall view is…. not enough resources, not enough productive capacity (esp with energy), not enough skilled labor, and a decapitalized-indebted-illiquid-insolvent financial system that cannot get traction to move ahead.

And when you don’t move ahead, you fall behind.

Start praying…

Byron King
Energy and Oil