2 from Kuntsler...
The Clusterfuck Nation Chronicle
Commentary on the Flux of Events
by Jim Kunstler
September 26, 2005,
Shouts of deliverance rang through the gallerias and subdivisions of Houston, while the picture of what happened off-shore remains murky. Rita might have spared the nation's fourth biggest metroplex, and most of the chemical-cracking infrastructure on-shore around it. But clawing up between Beaumont and Lake Charles, she cut a path through the densest concentration of offshore oil and gas rigs in the whole Gulf of Mexico. We don't know they all came through yet, or how the pipelines below the surface fared.
What happens next on the oil and gas markets -- and up-close in pump prices and home furnaces around the land -- will be an interesting story.
The combined fury of Katrina and Rita has obviously flattened whole communities in a large area. One outcome will be what is called "demand destruction," which means that the people who owned all those shredded homes, crushed cars, and flattened businesses will be using less oil in the months ahead. The catch is natural gas: the Gulf coastline is very temperate, even subtropical, and does not require much home heating. So, little demand for heating will have been affected, while the supply of natural gas has been cut twice in a month.
Half the houses in America are heated with natural gas and most of them are elsewhere than the Gulf Coast. On the markets, the price of gas is now heading north of $15 a unit (1000 cubic feet). It could easily hit $20 by Christmas, which would be about 700 percent higher than the price in 2002. Everyone in the non-Sunbelt is going to feel the pain this winter, and quite a few of the poor and infirm may freeze to death.
This is going to be a whole new kind of crisis for America and will set off a new kind of political fury. Both parties will get it in the neck but, of course, the Republicans led by the Bush White House will get it worse, because they are nominally in charge of things. There will be nothing they can do about the natural gas crisis. You can't get any significant amount more of it from overseas because it requires special tankers and terminals to receive it, and those terminals will not be built before the robins come back to Kalamazoo. The Democrats will have to prove that they don't deserve to join the Whigs in the Hall of Extinct Parties.
The political allegiance of the American public will be fully in play. Politics, like nature, abhors a vacuum, and we are likely to see the emergence of something new, perhaps something like the British National Party (BNP) which combines a very aggressive agenda on energy policy with overt fascism. The American people will be starved for action, too, and will be waiting for a man of action to embody their desperation. Let's hope that the characters who percolate out of this mess are not maniacs. The outrageously wealthy had better duck-and-cover -- the half-billion-dollar-CEOs, the $20-million-a-picture movie stars, perhaps even the relatively humble drivers of Hummers and Beemers. The sinking middle class will want to eat them.
Oil prices may hang back in the low 60s for a little while -- a combination of less driving, relief over the refinery situation in Houston, and some financial monkeyshines like shorting in the markets (perhaps by government-connected entities seeking to soften up futures prices). But the basic fact is that global oil supply and global demand are now so close that any loss of crude inputs anywhere is going to result in both spot shortages and higher prices. Right now, the supply crunch is being borne by third world countries. The catch there is that some of these third world countries are also oil-producing countries, like Indonesia and Nigeria, and the latter is in the process of falling into social anarchy, which will further impact the global supply. In any case, I don't expect oil prices in America to lay low for long. By Christmas, gasoline pump prices will have joined home heating prices in a vicious pincer around the neck of the non-rich classes.
The serious public conversation of our energy predicament has not begun, and when it does it will be too late. In the background of all this, an economy based on suburban sprawl and easy motoring is going to absolutely fall on its ass, and that means a much quicker end to the housing bubble than we might have expected a month ago. It might also lead to both the demise of the airline industry and the nationalization of what remains of it. It will certainly quash any remaining faith that such an economy can produce wealth, which is what the financial markets are based on, so look out below on Wall Street.
September 19, 2005
Take a good look at America around you now, because when we emerge from the winter of 2005 - 6, we're going to be another country. The reality-oblivious nation of mall hounds, bargain shoppers, happy motorists, Nascar fans, Red State war hawks, and born-again Krispy Kremers is headed into a werewolf-like transformation that will reveal to all the tragic monster we have become.
What we will leave behind is the certainty that we have made the right choices. Was it a good thing to buy a 3,600 square foot house 32 miles outside Minneapolis with an interest-only adjustable rate mortgage -- with natural gas for home heating running at $12 a unit and gasoline over $3 a gallon? Was it the right choice to run three credit cards up to their $5000 limit? Was I chump to think my pension from Acme Airlines would really be there for me? Do I really owe the Middletown Hospital $17,678 for a gall bladder operation that took forty-five minutes? And why did they charge me $238 for a plastic catheter?
All kinds of assumptions about the okay-ness of our recent collective behavior are headed out the window. This naturally beats a straight path to politics, since that is the theater in which our collective choices are dramatized. It really won't take another jolting event like a major hurricane or a terror incident or an H4N5 flu outbreak to take things over the edge -- though it is very likely that something else will happen. George W. Bush, and the party he represents, are headed into full Hooverization mode. After Katrina, nobody will take claims of governmental competence seriously.
The new assumption will be that when shit happens you are on your own. In this remarkable three weeks since New Orleans was shredded, no Democrat has stepped into the vacuum of leadership, either, with a different vision of what we might do now, and who we might become. This is the kind of medium that political maniacs spawn in. Something is out there right now, feeding on the astonishment and grievance of a whipsawed middle class, and it will have a lot more nourishment in the months ahead.
There are two things that the newspapers and TV Cable News outfits are not covering very well. One is that the Port of New Orleans is not functioning, with poor prospects for a quick recovery, and with it will go much of the Midwestern grain harvest. Another thing that has fallen off the radar screen is the damage done to the oil and gas infrastructure around the Gulf Coast, especially the onshore facilities for storing and transporting stuff, and for marshaling the crews and equipment to fix stuff. The US is going to run short of its customary supplies for a long time. The idea that these things will not affect an economy of ceaseless mobility is not realistic.
These serious problems on-the-ground are going to affect the more ephemeral elements floating around in the financial ether: the value of the dollar, the hazard in hedge funds, the credibility of institutions. By October, the hurricane season will be ending and the stock market crash season will be underway. It is hard to imagine that companies like WalMart really believe they will keep their profits up when their customers are paying twice as much as they did a year ago to heat their houses and fill their gas tanks.
Meanwhile, does anybody remember a place called Iraq? A bomb that killed thirty people was reported on page 12 of the Sunday New York Times. That's how important Iraq has become. But, I guess, a nation can hardly pay attention to a bullet in the foot when it has a sucking chest wound. |
