Diesel Revelation

We have all heard ad nauseam about the high price of gasoline, especially the unexplained prices in North Bay.

But last week it was the price of diesel fuel that finally brought home to me the coming crisis. For the first time in my memory, the cost of diesel exceeded the cost of regular gasoline at the retail pumps. I calmed down a little when I rationalized that the TDI was using 5.5 litres per 100 km and the diesel was still a bargain.

But how does fuel that costs less to produce than the more refined gasoline translate to the price at the pumps? Okay, okay, I know pricing is set by the stock market, not any reality of the day-to-day delivery of this commodity to the end user. Price fluctuations have little to do with the actual cost of crude, but rather on how much of this precious item is going to be available at any given time in the future. Just this past Wednesday the price of crude dropped 5% because stock traders took profits. There was no change in the volume of crude pumped, refined or delivered – just price manipulation of the oil futures by ‘investors’.

Perhaps this price blip is the first sign of the growing supply problem for us in North America. We use our fossil fuel without much concern about the supply. We continue to drive inefficient vehicles, transport commodities by road rather than rail and use petroleum by-products with little thought about recycling or conservation. Oil reserves in the States have been dropping so fast that the US, relying on a large percentage of their supply from other countries, is beginning to show concern.

The damage from the recent hurricane in the Gulf of Mexico is going to slow production there for at least two years. All those oil rigs in the Caribbean may be too vulnerable to storms to be a reliable source of oil. For an administration that does not support Kyoto nor believe in global warming, the force and frequency of hurricanes in the south maybe a wake-up call, if not to the government, to the oil producers and investors in the Gulf.

The wars in the Middle East are casting doubt on the guarantee of supply from that area. One of these days the Nigerians are going to demand higher prices for their crude. Uncertainty in the former USSR raises caveats for their customers. Fortunately for the US, South American oil producers are so close to the American sphere of influence that they may have little choice but to sell to the US. The same applies to our Canadian supply and reserves. Our best customer and largest trading partner will ensure that we continue to supply fossil fuel to them, quid pro quo.

All is not well with our partner to the south, not only with their shrinking oil reserves. It may matter little whether Bush or Kerry wins the election, the Titanic of the American economy will not be able to change course very quickly. And there are some big icebergs out there, the coming oil crisis being only one.

The rapidly growing American debt is beginning to affect the value of their currency, the wherewithal which buys crude oil. Printing more paper will not help as the traders begin to realize that the US paper is devaluing around the world. One begins to wonder whether we were right to drop the Gold Standard in favour of the almighty US dollar.

American foreign policy – the war in Iraq, war against terrorism in Afghanistan and elsewhere – is taking a toll, not only on the American public, but on relations with other nations. A retreat into more isolationism will not help now as American influence is shrinking around the world. When they were a big, rich and powerful island, they could stand aloof, but with the rise of the tiger and dragon economies in the Far East, there are new, and perhaps better, trading partners as options for the rest of the world. Even for Canada. Those colourful Chinese Yuan may look more attractive to us than the pale US greenback.

American trade deficits are going to increase until the Americans reverse the trend of Wally-Marting everything and bring jobs back home. And those off-shore jobs are a serious issue as more and more Americans search for jobs, even low-paying jobs. The great American Dream, supported by capitalism, is being appropriated by the Chinese and Indians.

A big part of that American Dream is the owning of an automobile. As millions of Chinese and Indians acquire cars and trucks, what is going to happen to the dwindling supply of fossil fuel? The laws of supply and demand will couple with the greed of the futures market and we will all be paying more for gas, diesel and those ubiquitous petroleum plastic products.

This may not be of concern to those who can afford higher prices, but as the gap between the rich and poor of the world widens, the higher cost of petroleum products is going to impact the poor to a greater extent. What will the higher costs of diesel do to construction and transportation costs? All those bulldozers, loaders, dump trucks, fire trucks, garbage trucks, buses and transport trucks are going to experience higher costs that are going to be passed on to the consumer.

Hydrogen fuel cells have been on the edge of the market now for some time, but there has been little pressure to forge ahead with this technology. More fuel-efficient hybrid cars are available but we continue to buy the gas-guzzlers. The issue is not whether we can still afford to pay for the fossil fuels, but that we are consuming them at an unsustainable rate. But then, we do the same with our water, electricity, rain forests and farmland.

We older folk may look at all this with a jaundiced eye, but it is going to be a far different world a few generations from now. Like the Titanic, we can forge ahead, full speed through the darkening night, or we can apply the brakes and change course. Will Captain Bush or Kerry of the US America see the danger in time or will they suck us all along in their wake into a whirlpool of recession?

Perhaps the price of diesel at the pumps across North America will be the revelation they need to change course.