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    America Motoring Towards Economic Disaster

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By : Gerald Greene    99 or more times read
Submitted 2008-06-03 19:58:31
America has been motoring towards disaster ever since its economy was structured around the automobile and cheap energy supplies.

Now that energy is no longer at all cheap disaster is imminent. Like the airlines, with oil above $125 a barrel, and probably headed much higher as peak oil soon kicks in with a vengeance, the American business and lifestyle model is broken

Gasoline prices at $4.00 a gallon have started to force Americans to cut back on their driving. Even middle class families are having a tough time making ends meet with rising gas prices, rising food prices, double digit increases in the cost of health care, stagnant incomes, and falling house prices occurring all at the same time. So some effort at energy conservation is finally underway.

Unfortunately, America and Americans have not yet come to grips with the fact that massive changes in the way that the typical American lives are going to be forced upon them. There isn't one politician in sight who has the guts to tell Americans that many of them face a long term reduction in their standard of living.

Driving a few less miles each week may help some but it isn't going to make a dent in the hard reality that the privileged position of The United States of America in the world is in a state of transition. Things will never be quite the same as Americans will be forced by economic events to adjust the wasteful lifestyle that they have come to know as the "American Way of Life".

American politicians, like John McCain, boldly declare that "the American way of life is non negotiable." However, they seem to overlook the fact that the US is hopelessly dependent upon foreign oil for over 60% of its supplies.

The drain daily of America's wealth to pay for oil imports at $125 plus barrel oil is hundreds of millions a day. It's not only the outflow of money that is the problem. It is also the rather unfriendly nations that a lot of those oil payment funds are being transferred to.

We are supplying a number of nations that are outright hostile to the United States with huge amounts of funds. This leaves the US extremely exposed to all sorts of potential challenges, including the financing of acts against US interests using what used to be our own money for the funding of hostile operations.

Here is oil import data from 2006 (latest available) supplied by the US Energy Information Administration. I expect that the numbers are far worse for the US now. Certainly at $125 a barrel oil the total amount that we pay has gone through the roof.

"The United States consumed 20.7 million barrels per day (MMbd) of petroleum products during 2006 making us the world's largest oil consumer. The United States was third in crude oil production at 5.1 MMbd. In addition to crude oil, significant contributions to U.S. petroleum supplies came from natural gas plant liquids, refinery gain, and alcohol fuels. However, we still needed 13.7 MMbd of imported crude oil and petroleum products to meet U.S. demand. The United States also exported 1.3 MMbd of crude oil and petroleum products during 2006, so our net imports (imports minus exports) equaled 12.4 MMbd.

Petroleum products imported by the United States during 2006 included gasoline, diesel fuel, heating oil, jet fuel, chemical feedstocks, asphalt, and other products. Still, most petroleum products consumed in the United States were refined here. Net imports of petroleum other than crude oil were 17% of the oil consumed in the United States during 2006."

Let's do the math using the 2006 12.4 MMbd figure but at today's prices. 12,400,000 x $125 = $1,550,000,000 a day leaving the country. How long can this go on? Not forever, of that I'm sure.

When you consider other outrageous costs, such as the 12 billion a month we are spending to fight the Iraq war, you can see that America is on its way to becoming a poor nation in a rather big hurry.

It's time for Americas to wake up and prepare themselves for a downsized future. The sooner that Americans start to wake up and demand that politicians speak the truth about such issues the better off we will be. Once we admit that we have a problem we can get on with the task of finding ways to better deal with it.

Unfortunately, no American politician seems to have the guts to admit that America does not have a special right to live beyond our means forever. For Americans, and for citizens of other highly developed nations, like the UK and Spain, the day of reckoning is close at hand, like it or not.
Author Resource:- Gerald "Taipan" Greene is a retired forex trader and portfolio manager who worked in Asia for over 20 years. The nickname was acquired in Hong Kong and is now used for a number of financial, political, and Internet business related blogs. One of them is at Bold Messenger
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