Over the past 12 months, wholesale prices are up 9.2%, the largest year-over-year surge since June 1981. Gas and food prices are to blame, since "core inflation", the economic indicator which excludes energy and food, was better behaved in June, rising by just 0.2%.
The main culprit is gas, I would think, as the cost of transporting raw materials to manufacturers is more expensive, and then there’s the added expense of transporting finished consumer goods from manufacturer to wholesaler to retailer. It all makes things more costly.
So we’ve got inflation and recession.
The unemployment rate is holding steady at 5.5% which is okay, BUT….
And then there’s that whole Fannie Mae bailout, which sounds like a flood occured in rural Alabama, but its not.
Dow down 100 so far today at all this economic news. [UPDATE: Okay, it resurged early this afternoon, but now it’s going down again…]
Oh, and getting back to gas, here’s an interesting trend. With the rise in gas prices, state and local governments can’t afford — wait for it — public transportation, so many of them are scaling back. Just the thing you need in a time of global warming and high gas prices — less public transportation.
I’m not an economist, so I’ll just use the layman’s terms for what this all portends: "shitstorm". [UPDATE: Hmmm. Bush said the same thing today, but with a different twist…
"I think the system is basically sound, I truly do. … I’m not an economist, but I do believe we’re growing. I’m an optimist. I believe there’s a lot of positive things for the economy."
–Bush as his sales pitch today
UPDATE: Have no fear, the BUSH ADMINISTRATION IS HERE!
"It’s been a difficult time for American families." Bush said at a press conference.
He noticed! He noticed!
His plans? Well, to bail out Fannie Mae and Fannie Mac by having the federal government buy some of the sagging stock. (While this may be a good idea, one wonders whatever happened to the conservative adage of "let the market take care of itself". Hmmmm?). Of course, just Bush saying that has caused those stocks to plummet today.
But turning to energy….
He wants to drill for oil in ANWR. This is, of course, silly. Additional oil production resulting from the opening of ANWR would be only a small portion of total world oil production, and would likely be offset in part by somewhat lower production outside the United States. Which means that when we get the oil, which won’t start happening until 2018, it’s going to be too little, too late. As the Wall Street Journal says:
At current prices even the high-end estimate would trim just about 1% from the cost of a barrel of oil, and even that reduction can’t be expected for almost 20 years.
Then there’s the notion of lifting the ban on drilling for oil off our nation’s coastline. We do this already, but there’s been a ban on doing it more. Probably because people don’t like this:
Happy vacationing, America.
Hmmm. Oil rigs off the Florida/Louisiana/Georgia/Carolina coast. Seems to me that those places tend to get hit by — oh, what do you call those things — hurricanes? By the way, don’t buy the myth that Katrina and Rita didnt cause oil spills off of Louisiana. It happened (video).
In fact, the clear satellite evidence of major spills was borne out by final reports. In May 2006, the U.S. Minerals Management Service (MMS) published their offshore damage assessment: “113 platforms totally destroyed, and 457 pipelines damaged, 101 of those major lines with 10″ or larger diameter.”
Unsurprisingly, this devastation caused significant spillage, according to the official report prepared for the MMS by a Norwegian firm:
Hurricanes Katrina and Rita Caused 124 Offshore Spills For A Total Of 743,700 Gallons. 554,400 gallons were crude oil and condensate from platforms, rigs and pipelines, and 189,000 gallons were refined products from platforms and rigs. [MMS, 1/22/07]
Hurricanes Katrina and Rita Caused Six Offshore Spills Of 42,000 Gallons Or Greater. The largest of these was 152,250 gallons, well over the 100,000 gallon threshhold considered a “major spill.” [MMS, 5/1/06]
The Exxon Valdez disaster spilled 10.8 million gallons, so this oil spill was very very large. (One reason it didn’t get the media notice was that it didn’t all happen in one place, so the damage was diffused).
And, ecology aside, the problem with drilling of the coastlines of America has some of the same shortcomings as ANWR drilling. What is potentially hypothetically there in terms recoverable oil and case is but a mere pittance of the U.S. oil reserves and a drop in the barrel (no pun intended) when compared to the worldwide oil market. In other words, not enough to make a significant difference in energy prices, and — once again — whatever impact it will make will be years away. [UPDATE: Bush admits at a press conference today that there won’t be oil from offshore drilling for a while, but says that drilling there will "change the psychology". Video here. Uh, no, it won’t change the psychology. An actual significant change at the gas pump — now — will change it.]
And finally, Bush is touting the whole "rape the pristine western lands for shale" thing again. Problem with that is, we don’t yet know how to turn shale into oil, and even if figure it out (which we’ve been trying to do since 1908, it’s going to be a bloody expensive R&D process. And the cost of all that will be passed on to the consumer.
So again, no energy savings…. just a boondoggle to the oil and gas industries.
God, I’m depressed.
FUN FLASHBACK: From CNN, 2 months after Bush took office in 2000:
Gas prices surging, but still below record levels
WASHINGTON — Gas prices have surged in the past 12 months, experiencing their biggest dollar increase in the past 30 years, according to a survey conducted for AAA.
Self-serve regular, unleaded gasoline averaged $1.54 per gallon nationwide, according to AAA’s March Fuel Gauge Report released Tuesday.
Those were the days, my friend…