$380 oil?

After a two-week lull, will the latest surge on the oil market crack the $60 level?

Please see Wampum for additional notes on the Republican Earth Day gift in the form of the odious Energy Bill I discussed yesterday. One article cited is an Aljazeera piece stating, ``A report prepared by energy economists at the French investment bank Ixis-CIB has warned crude oil prices could touch $380 a barrel by 2015.''

Wampum also points to a New York Times article with an angle on the oil situation that has bugged the heck out of me for a long time:

...even as prices cling above $50 a barrel, those fears [of recession] have proved to be exaggerated. So far, the economy has weathered the price increase with remarkable ease and there is reason to believe that high fuel costs do not have quite the impact they once did.

The reason is that oil has been knocked off center stage in the American economy. The decline in manufacturing and the rise in service-oriented jobs means oil is not as indispensable for economic growth. Manufacturers and electricity-generating plants, once among the biggest users of oil, now depend primarily on natural gas, coal and, to a lesser extent, nuclear power.

This is essentially nonsense designed to soothe the rich -- including those people who have profited handsomely from the destruction of US manufacturing and labor. The fallacy here is that because the factor by which oil consumption tracks economic growth and the %-mix of primary energy sources in various sectors has changed over the years, ``oil is not as indispensable.''

Well, it is indispensable. Globalized economic activity would grind to a halt without its primary transport fuel and precursor chemicals for its plastic. We won't find this out until actual shortages develop. When this happens, prices will rise much more rapidly than they are now while bottlenecks in the delivery of fuel and goods to voracious consumers appear. But we are not to this point of shortage yet.

For now, we must contend with a monopolistic cartel pattern in the energy sector. Greg Palast lays this out here (on Democracy Now!) and in an article for the April 2005 Harpers (not online yet), in context of the US taking of Iraq. Current high oil prices for the moment are actually good for the rich, as energy companies corral stupendous profits. This keeps a lot of balance sheets in the pink for the time being.

However, a day of reckoning is on the horizon. We can't know for sure when that day will come, 2015 or whatever. But when it does and oil is $380/barrel, articles like the one cited from the Times will be a thing of the past.