As of writ­ing this crude oil is still flow­ing in the Mid­dle East and through the Suez Canal (as well as oth­er prod­ucts) in spite of the chaos in Egypt. Will that last is the ques­tion. And yet even with the con­tin­u­a­tion of oil world prices for crude are ris­ing as is gaso­line at the pump.

2011 oil and gas price pre­dic­tions are all over the map from $90-$100 per bar­rel crude to retest­ing the 2008 $147/barrel lev­el. Con­cur­rent­ly pre­dic­tions of gaso­line prices at the $5-$6/gal lev­el or high­er are equal­ly being seen in the some peo­ples’ tea leaves.

I don’t make price or breaks pre­dic­tions and I’ve lost far more than I ever made lis­ten­ing to TV “experts” on finance and mar­kets. But it is a real­i­ty that trou­ble in the Mid East always leads to some kind of bump in oil and gas prices.

Under more nor­mal, bet­ter eco­nom­ic con­di­tions it would be a nui­sance at the most. But today is not nor­mal, bet­ter eco­nom­ic times:

-          Offi­cial unem­ploy­ment is 9.1% (U6 is at 16%).

-           Home fore­clo­sures are still sky rock­et­ing while real estate val­ues con­tin­ue to fall.

-          The nation­al debt is going to hit $14.4 tril­lion in August.

-          The annu­al nation­al deficit is expect­ed to be $1.5 tril­lion in 2011.

-          Offi­cial infla­tion is only around 2% but that doesn’t include food and fuel costs (how con­ve­nient!).

-          The 99ers are rapid­ly run­ning out of ben­e­fits with no decent jobs recov­ery in sight for years to come at a min­i­mum (hail the job­less recov­ery!).

-          Indi­vid­ual states and cities are tech­ni­cal­ly, and in many cas­es func­tion­al­ly, bank­rupt.

(just to list a few issues)

If the chaos in Egypt does impact the flow of oil through the Suez Canal, or even worse, ignite fur­ther chaos in oth­er Mid­dle East­ern coun­tries (notably Sau­di Ara­bia, Yemen, and UAE) the pre­dic­tions for $5-$6 or high­er gas will eas­i­ly come true.

With all this on America’s plat­ter already the ques­tion becomes: If it does hap­pen (real­is­ti­cal­ly things are rarely as dark as pre­dict­ed), will this be the tip­ping point in Amer­i­ca for social unrest?

Not because of the price of oil or gas per se. But rather because of the rip­ple effect through­out an already weak Amer­i­can econ­o­my.

Peo­ple are already heav­i­ly bur­dened to pay for the neces­si­ties of life. Like it or not oil as in gaso­line, heat­ing oil, and diesel is one of those essen­tials. All fine to say that in 30 years we’ll be 80% or bet­ter on “green” ener­gy. Maybe.  Maybe not. But that isn’t today. Peo­ple still need oil to heat their homes and pow­er their cars (not to men­tion elec­tric gen­er­a­tion).

The price of oil rip­ples into food costs too which are already on the rise due to com­mod­i­ty prices and world demand. Those trac­tors and har­vesters don’t run on fuel cells or solar bat­ter­ies. The trucks that car­ry the prod­uct to the food proces­sors and then to the super­mar­kets aren’t wind pow­ered. The trains that take food across the coun­try in a mat­ter of hours can’t do it on com­pressed gas. And that doesn’t even begin to con­sid­er the costs for ocean freight, air trans­port and trav­el, plas­tics and syn­thet­ic man­u­fac­tur­ing (of which petro­le­um is a sig­nif­i­cant raw mate­r­i­al).

A great many Amer­i­can fam­i­lies are already liv­ing a very ten­u­ous life through no fault of their own. Job loss, hours worked loss, lit­tle is any pay rais­es over the last few years, ris­ing fees and tax­es at all lev­els of gov­ern­ment, near zero inter­est on bank deposits, CDs and bonds, all put a squeeze on unsteady indi­vid­u­als and fam­i­lies. A sharp and sus­tained rise in oil prices may be all that is need­ed to push thou­sands, per­haps mil­lions, of fam­i­lies off the edge.

Even with­out push­ing fam­i­lies a rise in oil that trans­lates to a rise in gaso­line will have a neg­a­tive impact on the econ­o­my. Peo­ple will cut back on dis­cre­tionary trav­el. Many are already doing so. That trans­lates into low­er incomes for the trav­el indus­try includ­ing hotels/motels, food and shop­ping, day attrac­tions and events, etc.

All this can eas­i­ly be the action that kicks out the already wob­bly legs of this [alleged] eco­nom­ic recov­ery and push­es the nation into a deep­er reces­sion if not full blown depres­sion.

(Foot­note: This arti­cle is not about get­ting off oil, too depen­dent on Mid­dle East oil, “green” ener­gy etc. The real­i­ty is at this stage of our social and tech­ni­cal devel­op­ment there sim­ply is not any­thing else as uni­ver­sal­ly applic­a­ble as oil, nor as effi­cient, eco­nom­i­cal (all things con­sid­ered up to now),  and as abun­dant (‘peak oil’ is a myth) as oil. Our entire soci­ety and econ­o­my is built around the use of oil. It can be changed. And not doubt some­day it will change. But “change” needs to be for the bet­ter and not mere­ly for the sake of “change” itself. Just as our lead­ers are call­ing for a slow and care­ful tran­si­tion to more demo­c­ra­t­ic struc­tures in Egypt and oth­er places around the world so do we have to adopt a slow and care­ful change to our soci­ety for less oil use. Any­thing less is a shock to the Amer­i­can sys­tem that may be irrecov­er­able.)

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