In 1998, oil was just $10 a barrel, and today it is over $60. We're also stuck in a war we may not be able to win.
The difference this time is that things are actually worse than they were in 1974, at least in my opinion. One difference is that the oil crises back in 1973 to 1974 and again in 1978 were political problems. Today, the oil crisis is a problem of diminishing supply and increasing demand. In other words, this time, there really is an oil crisis.
Many people today believe that oil will once again return to the $35-a-barrel level and aren't concerned. Or they believe that with better technology, energy companies will find more oil, and happy days will be here again.
I believe differently. Not that I'm an oil expert, but in 1966 through 1968 I was hired as an apprentice by Standard Oil of California, where I learned a lot about oil and the oil industry. Although I did see oil prices slide back down in the 1970s, this time, I believe they will go higher, not lower. I wouldn't be surprised if we soon see oil at over $100 a barrel and gasoline at $5 to $12 a gallon at the pump.
Wealth and Energy
Pricey oil makes clear that wealth really is energy in various forms. And that means more than just money. If I'm correct, and oil does go over $100 a barrel, you'll see some individuals' -- and some companies' -- wealth equation look like this:
For people who live in the suburbs and must commute long distances to work, their wealth will sink as energy prices rise. The same is true for the airlines, food, and car companies, plus destinations such as Hawaii, which depend on cheap energy to grow.
For other people (and some companies), their wealth equation will look like this.
For people who invest in oil companies or own oil production, their finances will reflect this equation. This is why Exxon-Mobil (XOM) has recently replaced Wal-Mart (WMT) as the most profitable company in America.
An Alarming Gap
While many environmentalists, concerned with global warming, are thrilled that oil supply is on a decline (and we truly do need to replace oil with more renewable forms of energy, such as wind and solar power), there's another concern that must be considered. If energy costs continue to rise and our economy stops growing and starts shrinking, many stocks will crash, older Americans will not be able to retire, inflation may skyrocket, businesses will close or cut back, and jobs will be lost. Not only will we be facing global warming, we'll be facing civilized chaos.
The problem today is that oil companies are too short-sighted, the environmentalists too far-sighted, and politicians only concerned with being elected. As a result, there will be a gap between the end of oil and a conversion to less destructive forms of energy. In this gap, all hell may break loose.
In my next article, I'll go into what I'm doing to prepare for the gap, as well as why I believe the gap can't be avoided. In other words, it will not be 1973-1974, or stagflation, all over again. I believe it will be the end of civilization as we know it -- and possibly the birth of a brave new world.
As my greatest teacher, Dr. Buckminister Fuller, said to my class in 1982, "Humanity will soon have to choose between utopia or oblivion.... Do we work only for ourselves or for our planet?"
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