... by Michael Trudeau, Colonial Resources
The United States is by far and away the world's largest petroleum consumer, and as I stated earlier, its demand is increasing. In the ten year period between 1995 and 2005, our oil consumption increased from 17.7 million barrels a day to 20.7 million barrels a day. That equates to roughly a 17% increase in a decade's time. This is a staggering increase when you consider that demand growth is much higher in the developing world than it is here in the United States. For example, China saw a 100% increase during the same period of time and India's oil consumption is expected to at least triple by 2020 from their 2005 levels. Again as you can see, we are clearly headed for trouble.
Why not simply find energy alternatives? Ultimately, we will be forced to do just that. There are, however, many problems inherent with simply switching from petroleum to wind or solar power, or to cars driven by electricity or hydrogen fuel cells, etc. The easiest problem to immediately point out is that any alternative would consume mass quantities of petroleum simply to produce it.
For example, ethanol is a gasoline alternative made using corn or other organic matter. Although it burns much cleaner than gasoline does, it creates more carbon emissions due to the process to manufacture it. Even sadder is the fact that ethanol uses more fuel in its manufacturing process than it produces when you consider the corn needs petroleum based fertilizers and pesticides to grow as well as the petroleum and gasoline used to manufacture and run the machinery to process it. Not to add insult to injury, but another unintended consequence of ethanol production is the rise in the price of feed corn due to the fact that most of the corn now being grown is being used to produce ethanol.
How Will Running Out Of Cheap Oil Affect Us?
Although the effects of rising oil costs will be far and wide with many of them being unforeseen at least in the beginning, we do have some idea of how this will affect our everyday lives. I recall a particular radio interview that I did with a program called "Beyond the Ordinary" based out of Yelm, Washington. Gas had just crossed the $3.00 a gallon threshold for the first time and the nation's cry was, "how can I afford to drive with gas costs so high?" What they also should have been crying was, "how will I be able to afford food with the price of gas so high?" That morning on my drive in to the office, I noticed one of my farmer neighbors pulling a combine from his barn and I wondered aloud, "how much petroleum do you suppose it takes to manufacture a combine?" Then I pondered, how much petroleum do you suppose it takes to make a loaf of wheat bread considering the amount of petroleum necessary to plant the crop of wheat using a petroleum based fertilizer and pesticide, to cultivate and raise it, to harvest it, to process the wheat to make the flour, to bake the wheat into bread, to wrap the bread with plastic, and then to ship it on average 1,500 miles to the grocer who then sells it to you and me? As you can see, it takes a lot of petroleum just to create a loaf of bread!
Most agriculture experts have already warned that a decrease in oil production would lead to a loss in food production and eventually shortages in food. We have already seen some glaring examples of both rice and wheat shortages with some even leading to rationing and strict purchasing limits. Further exacerbating the problem is that farmers are raising corn to produce ethanol in an attempt to stem the tide of rising fuel costs. This has led to an even wider shortage of corn for food production and likewise forcing the farmer who relies on it to feed his stock to pay more for the corn with the ultimate increase being passed on to us as consumers by raising prices at the local grocery store.
People Are Moving Back To The Cities To Save On Gas!
With this I began to realize the scope of the problem which led me to look at other areas of our lives that would be affected by the end of the "cheap oil era." In 2001, my wife and I moved to a rural area about fifty miles away from the center of the Twin Cities metropolitan area of Minneapolis/St. Paul. That meant a 100-mile daily commute for the both of us. At that time, gas was relatively cheap and there was a mass exodus underway of folks moving from the city centers to suburban areas. The suburbs were expanding like a waistline on Thanksgiving Day.
I've now noticed that the rising cost of gasoline plus the burgeoning mortgage crisis (which is a whole other topic for discussion and don't get me started), has certainly curtailed that activity. In fact, I am now seeing "for sale" signs all over the suburban and rural areas as more and more people are forced back into the city because they cannot afford the fuel necessary for their long-distance commutes. This is not something we will be seeing in the future. This is something happening all over the nation right now. What once was a joke to say; "I've got some swampland in Florida I can sell ya" will soon become "I've got some property in the suburbs I can sell ya."
What Can We As Individuals Do To Stop The Bleeding?
The bottom line is this is a loss to your "bottom line," and the best way to protect yourself and your family is to simply offset that loss with a gain. When I did that radio interview with "Beyond the Ordinary" I recommended precious metals to counteract the increasing prices for our day-to-day living expenses. Since 2001, the price of gold has risen on average 30% annually. Last year the average cost of food was up 31% higher than just the year before. Gold held its buying power perfectly and offset the rise in food prices.
We certainly know that food is not the only thing rising in price. Wouldn't it be great to mitigate the ever increasing costs of gasoline, home heating, health care, college tuition, etc., as the era of cheap oil comes to an end? Remember, that Peak Oil is not the end of oil, it's the end of cheap oil and its effects are just beginning to be felt as it rears its ugly head. The time to take protective measures is now, and I'm still recommending precious metals as a hedge to limit loss. Gold has a 5,000 year track record of keeping people safe in times of economic upheavals. Many civilizations have come and gone, and as I like to say, "The Romans are no longer in charge here, but we're still spending their gold coins."
Gold and silver can be and have been wonderful protectors. If you'd like more information on how to protect yourself and your family, we will be happy to help you. Please call Colonial Resources Inc. toll free at 1-800-685-4042 and ask to speak to me personally.
© 2008, Michael Trudeau
Listen to Michael's Beyond the Ordinary KRSE Archived Radio Programs
Michael Trudeau an Economic Advisor and Monetary Specialist for over fifteen years. Michael discusses the system, how it works, what is the truth and myth, what we can do. If we truly understand and accept the situation, what we must do is protect our assets. With utmost confidence we your hosts, highly recommend Michael as a trusted source for information and services.
