THE PRICE OF OIL
OIL GOES BACK UP
CALIFORNIA GOES DOWN
by
Sanford Pinna, M.D.
Copyright 2009
Today, the day before Christmas, Oil hit
$77.00 a barrel on the international markets.
Today, Governor Schwarzenegger of
California asks Actor Obama for $21 Billion
in help for California, where the jobless exceed
12 percent and taxes are insufficient to meet
basic needs.
ECONOMIC RIP TIDE RETURNS
Nature works in waves.
Nothing goes in a straight line.
The Talking Heads of the Government, and
of Business and of the Media are all saying
that the “recession” is over and that the
U.S. and Europe are on their way to recovery.
Great social events behave in a natural
way. Events will bounce up and down, but the
Tide runs only in one direction—towards the
depths of the Sea.
In the U.S., people are still driving monster
cars over long stretches of highways, from their
homes to work. This is particularly true in
California.
How can the Thirty Seven Million people
of California pay higher oil prices for transportation,
heating, cooling, cooking and living and still
pay their taxes?
The State of California is bigger than most
countries in the world.
Countries of this size have cities where
the population lives, and small highways.
In California, people have decided to live
in the forests, and commute hours on grandiose
highways to work.
The energy costs for the State of California
are beyond belief.
As can be seen from the graph, the usage
of gasoline is falling since the advent of the
recession. The people of California cannot
continue to use such tremendous quantities
of oil.
I predict that Californians will shed their
forest homes and return to cities. This will
lower the cost of housing in California.
They will also go to tiny cars.
Schwarzenegger will dump his SUV’s.
HOW HIGH WILL OIL GO?
Oil is a world commodity.
The population of the world is growing—and,
getting wealthier. More people in the world
can buy vehicles and use motors to do their
work.
The quantity of oil needed is growing.
The quantity of oil available is declining.
The world has passed the Peak of Oil Production.
The finite quantity of oil on this planet
is getting smaller year by year.
Since price obeys the La of Supply and
Demand, the price of oil must rise.
As I stated above, everything moves
in the shape of waves.
The price of oil will go up and down, but
the direction will always be higher.
I predict we will see the price of a barrel
of oil exceed its high price of $150 a barrel,
seen two years ago, in the next two years.
This will make driving monster cars
unaffordable. It will also make driving
long distances on a daily basis unaffordable.
OIL PRICE AND THE RECESSION
The cost of energy is one of the prime
movers of economic activity.
We saw, in Economic Rip Tide, that the
cost of labor, was the primary reason why
the West shunted its manufacturing and
agricultural industries to Asia.
The cost of energy is one of the
three basic costs of economic activity.
If the cost of energy goes up, economic
activity must go down.
The payments for energy leave the
country using the energy and flow to
another country which supplies the
energy.
In the country that uses the energy
there is less money to buy and sell goods.
Buying and selling are the cogwheels of
any economy. Less money equals less
buying and selling which equals less
economic activity which equals less
employment.
The cost of capital is the third cost
of any economy.
We will see that cost rise as money
leaves a country that uses energy and
flows to the country that sells the energy.
CONCLUSION
Cheap labor is found in Asia. Money
is flowing there. Energy is found in the
OPEC countries. Money is flowing there.
The West is bleeding money.
The economy of the West must
become weaker.
