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SPPI BLOG from the Washington Times
The turmoil in the Middle East ...the Federal Reserve’s decision to further devalue the U.S. dollar through a third round of “quantitative easing” (QE3), and rising oil prices are combining to create a toxic economic brew that could send the global economy into recession.
That was the assessment of International Energy Agency chief economist Fatih Birol. “I see the [oil] prices today, in this economic context, as unbearable for consumers,” said Birol on Friday. “High prices together with other factors could push the global economy back into recession.”
However, in some ways, Mr. Obama should be claiming credit. As Obama Energy Secretary Steven Chu told the Wall Street Journal back in 2008, the goal all along has been to explode U.S. gas prices to the $6 to $8 a gallon prices found in Europe. “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe,” Mr. Chu said.
Mr. Birol’s comments come as U.S. oil prices hit a four-month high on Friday:
Since late June, the price of crude oil has climbed about 25 percent, fueling a 16-cent increase in the average price of regular gasoline and adding to the economic headwinds facing President Obama in the final weeks of the election campaign.
Industry experts believe that President Barack Obama may use the Middle East uprisings and soaring fuel costs to justify tapping the nation’s 700 million barrel emergency Strategic Petroleum Reserve, similar to what Mr. Obama did last year to no lasting effect.
But it was the Federal Reserve’s decision to pump $40 billion so-called “stimulus” dollars a month into the U.S. economy in the form of buying mortgage-backed securities that ultimately may prove to be the match that lit the economic powder keg. As the value of the U.S. dollar goes down, oil prices go up. That means slower economic growth and higher consumer prices.
As Reuters explains, the confluence of all these economic factors is producing a chain reaction of higher consumer prices, plunging industrial production, and soaring gas prices:
Highlighting the risk to the economy from surging oil prices, a jump in gasoline costs pushed up U.S. consumer prices in August at the fastest pace in more than three years and squeezed spending on other items, threatening to slow economic growth.
Industrial production dropped 1.2 percent in August, the biggest decline since March 2009. The consumer price index increased 0.6 percent, the first rise in five months and the biggest since June 2009.
Gasoline prices, which also recorded their largest increase since June 2009, accounted for about 80 percent of the rise in consumer inflation last month, the Labor Department said.
Whether Mr. Obama can duct tape the looming economic collapse long enough to win reelection remains to be seen.
However, in some ways, Mr. Obama should be claiming credit. As Obama Energy Secretary Steven Chu told theWall Street Journal back in 2008, the goal all along has been to explode U.S. gas prices to the $6 to $8 a gallon prices found in Europe. “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe,” Mr. Chu said.
Through its mismanagement of the Middle East crisis and endless rounds of “quantitative easing” (and the concomitant currency devaluation such “stimulus” brings), the Obama Administration has almost reached its goal of European-style gas prices.
On Friday, a gallon of regular gas in the Bronx cost nearly $5 a gallon.
This is part of the Obama’s administration war on coal and fossil fuels. The ideologues from the colleges with no real world experience are convinced this will spark an explosion in wind and solar. Democrat Rep. Markey reacted to the passage of the bi-partisan “no to the ban on coal” bill in the house (which Reid widely regarded as the worst Senate Majority Leader in memory, refuses to take to a vote in the senate by claiming republicans were responsible for the lack of progress of renewables. He and his party have not done their homework as usual.
A large chunk of the $800 billion in stimulus dollars went to companies and ventures that has biggest supporters and bundlers Many of these ventures went bankrupt costing taxpayers billions. Although his crony capitalists walked off with millions in their pockets.
- Amonix Solar: FAIL! manufacturing plant in North Las Vegas, subsidized by more than $20 million in federal tax credits and grants given by Obama Administration, has closed its 214,000 square foot facility a year after it opened.
- Solar Trust of America: FAIL! - Filed Bankruptcy in Oakland, CA, April 3, 2012
- Bright Source: FAIL! - Bright Source warned Obama’s Energy Department officials in March 2011 that delays in approving a $1.6 billion U.S. loan guarantee would embarrass the White House and force the solar-energy company to close. Lost Billions of dollars but Getting More Money To Keep Trying. Can you say, “This isn’t working?”
- Solyndra: FAIL! - Obama gave Solyndra $500,000,000 in taxpayer money and Solyndra shut its doors and laid off 1100 workers in August 2011 After Billions in Losses due to failure to make a solar product that works!
- LSP Energy: FAIL! - LSPEnergy LP filed bankruptcy protection and a sale of its assets in Feb 2012
- Energy Conversion Devices: FAIL! - On February 14, 2012 Energy Conversion Devices, Inc. and its subsidiaries filed for bankruptcy
- Abound Solar: FAIL! - Abound Solar received a $400 million loan guarantee from Barack Obama announced in June, 2012 that it would file for bankruptcy
- SunPower: FAIL! - SunPower stopped producing solar cells last year at near bankruptcy restructured only with help of, get this, oil giant TOTAL who owns 60% stake. Irony! Still struggling…
- Beacon Power: FAIL! – Beacon Power Corp filed for bankruptcy Oct 2011 just a year after Obama approved $43 million loan Government loan guarantees
- Ecotality: FAIL! - ECOtality, a San Francisco green-tech company that never earned any money on the verge of bankruptcy after receiving roughly $115 million in two loan guarantees from Obama
- A123 Solar: FAIL! -A123 received $279 million from taxpayers thanks to President Obama’s Department of Energy loan guarantees and after Solyndra bankruptcy is getting another $500M from Obama and it has lost $400M
- UniSolar: FAIL! - Uni-Solar filed for Ch 11 bankruptcy in June 20 this year laid off hundreds got more Obama money still failing but still in business
- Azure Dynamics: FAIL! - Azure Dynamics files for bankruptcy in June wasting millions in Obama “Stimulus” and tax credits. Azure Dynamics LLC filed for bankruptcy protection in Canada and the US. Azure laid off 120 of its 160 employees in Oak Park; Boston; Vancouver, British Columbia; and the UK.
- Evergreen Solar: FAIL! - Evergreen Solar received $527 Million in Taxpayer money from Obama filed bankruptcy
- Ener1: FAIL! received more than $100 million in government funding from the Obama administration filed for bankruptcy January 2012
Obama’s ads claim Romney while with Bain transferred jobs overseas but most all of his funded corporations including GM, which has 2/3rds of their workers overseas. Most of the companies that benefited from stimulus bought materials manufactured overseas, improving employment in China and India. Obama touts GM as creating jobs at home and curses Boeing for outsourcing. This is explained by the “chosen one’s” definition of outsourcing. Boeing was guilty of outsourcing jobs to a ‘right to work’ state, and GM pays its bloated union wages by outsourcing to China, Mexico, etc. The administration has rebuked GM’s requests to allow them to manage their own company. GM sales are not doing well in the US. Temporary layoffs have been made for plants that produce the Chevy Volt, which has been dismal failure. Most of the sales have been forced sales to the military or government agencies or by companies like GE closely allied to the President.
Obama has been a failure in every business venture his administration has tried to mange and yet he wants to now is about to begin the takeover and management of 1/6 of the economy in the health care industry.
The administration in their campaign claims to be all about the middle class yet proposes to institute a carbon tax in a second term. This was described in a NYT editorial. This is would increase the gasoline price by $3 to at least the $7 target set by energy secretary Chu in his first term. Obama has promised his environmental supporters he will have more flexibility to institute his green agenda if he gets a second term, even though it has failed miserably in Europe with heavy investment in wind and solar. Of course as prices rise, the administration would blame big oil for price gouging and maybe attempt takeover of the energy sector like they did for the health and auto.
Wind has been around since the 80s – 1880s and solar the 90s -1890s. Had they been cost effective they would be a bigger part of the energy mix as President Carter pushed for. Still less than 3% of our needs come from wind and solar. WHY?
They found out in Europe where they heavily subsidized both that both are undependable and extremely costly. The sun doesn’t always shine, the wind doesn’t always blow.
Energy costs skyrocketed, and companies shut down or relocated factories overseas. Spain lost 2.2 real jobs for every green job created and only 1 in 10 green jobs was permanent. Spain has an unemployment rate of 25.5% and they stopped the subsidies. Italy lost 3.4 jobs for every green job created.
Denmark, the top wind country has the highest energy costs of any country in Europe.
Britain found wind was undependable delivering only 0.5% of their electricity needs during December 2010, the second coldest December since 1659 in the Little Ice Age. Over 25 of the population is in energy poverty in Wales – having to choose between and heating and eating. Europe is rushing back into fossil fuels to the environmentalists frustration.
Carbon taxes failed in Europe and Australia. They would drive gasoline prices up an additional $3 a gallon here in the US and increase home heating and cooling costs. It would be a very regressive tax, affecting the low and middle class the most.
All this nonsense to try and reduce a beneficial gas, CO2 that has greatly helped vegetation. Even in this droughty, hot summer, crop losses were small compared to 1988 when losses topped $80B (2009USD). The extremes of weather in the last two years are consistent with the second strongest La Nina and a very cold Pacific PDO.
BTW, increased energy and food costs have a domino effect on the prices of all goods and services, reduce disposable income, with most effect for low and middle classes. Already the median middle class household income is down over 4.8% in the last 3 years which is worse than the 2.6% decline in the recession that preceded it.
Americans, you have just over 40 days to awaken from your hypnotic haze.