oil prices still the key

Posted on May 8, 2008

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While the worst of the credit crunch might be over, as articulated by US Treasury Secretary Henry Paulson in the hope of shoring up confidence in the battered US economy, the real indicator consumers should be watching is oil prices.

The economy has been flirting with disaster, no thanks to the credit crunch, which led to a housing slump and foreclosures nationwide, along with skyrocketing energy costs. With the credit crunch “closer to the end” than the beginning, as Paulson described to the media, energy costs remains the biggest worry for the economy.

petroleum field

But the pain of rising energy costs is not just felt at gas pumps, where prices have already crossed the psychological $4 a gallon line in some parts of the country.

With crude oil hitting just shy of $124 a barrel in trading today, and talk that it might go as high as $200 by the end of the year, the credit crunch might pale in comparison in the economic pain infliction category to the troubles that could be caused by ever-rising energy prices.

Energy costs will affect more people than the credit crunch could. We might not all take out risky mortgages but every part of our lives involves the use of energy in one form or another.

Besides the cars we drive or the public transportation we take, even basics like our food and clothes prices are affected by energy costs, due to the production and transportation costs of the food to our local supermarkets, and the clothes that have to be shipped from China or Vietnam. Manufacturing plants need to use massive amounts of energy to run their usually energy-intensive factories. Farmers need fuel to run their tractors. The airlines industry is powered by oil. The harder we work in producing all kinds of products, the higher the demand for energy and fossil fuels, and the steeper oil prices become. And countries with nothing other than the luck of the geographical draw benefit.

There really has to be a more concerted effort to look into developing alternative energy sources. For far too long, we have been held hostage to countries that supply us with oil and it is our own fault that we have not yet summoned the will to get out of that nasty scenario.

The oil is not going to be there forever. It will run out in the next few decades and the oil-producing nations know it. They are thus relentless now in holding down production and supply despite the ever-growing demand for more oil.

With gas prices going through the roof, people should summon the energy and will power to say “enough”. Now is the perfect time to want to do things differently and wean ourselves from the prison of oil dependence. We might just be willing to try out alternative sources of energy if there was enough leadership and initiative out there. Dare we hope that with a new administration in the White House next year, things might change and we will finally free ourselves of the shackles of oil dependency and all the political problems that are associated with it?

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