Did Your Car Cause the Crisis?

[marmar]

from the American Prospect:



Did Your Car Cause the Crisis?
The threat posed by expensive oil hasn't disappeared.

Ryan Avent | May 21, 2009 | web only



If you ask an average American to explain just how we managed to get ourselves into this economic mess, he will most likely tell a fairly simple story. People borrowed too much, housing prices got out of hand, Wall Street went nuts, and eventually it all came down with a crash, leaving us in the worst downturn since the Great Depression. What will almost certainly be left out of the account is what was the biggest economic story of 2008, right up until Lehman Brothers went under -- a doubling in the price of a barrel of oil, and the resulting pain at the gas pump. Hard to imagine that the most significant oil shock since the 1970s has been relegated to historical sideshow, but these are the times in which we find ourselves.

But in fact, the oil spike of 2008 (following on almost a decade of steady increases in the price of crude) was an integral part of the economic storm that assailed the nation last fall. And the threat posed by expensive oil hasn't disappeared. Quite the contrary; it stands ready to derail a fledgling economic recovery this year and handcuff growth until Americans break their decades-long petroleum habit.

To understand why, one has to go back to the mid-1980s, as the American economy was finally emerging from the era of stagflation into a world where crude oil was once again cheap and plentiful. Cheap crude enabled two key trends that would dominate the next two decades, a period coincident with the settling down of the Baby Boomer cohort. Automobiles became ever larger, as the minivan surged to popularity before giving way to the Suburban and a kingdom of SUVs. And the second great wave of suburbanization took place, giving rise to the endless geography of the exurbs. These trends were an understandable reaction to the times; millions of households sought safety and security in their automobiles and in large, affordable homes miles away from cities imploding amid the crime spike of the crack age.

But the America that emerged at the turn of the millennium was one heavily dependent on cheap oil. This was an unappreciated vulnerability. Or rather, it was appreciated for all the wrong reasons. Even as national leaders fretted about the security implications of our dependence on oil, rapid economic growth in emerging markets like China and India began placing heavy pressure on resource stocks. The years of cheap oil had reduced the incentive to invest in exploration and production of new energy sources, and so supply had grown slowly even as demand had soared. Prices rose steadily, from around $12 per barrel in 1998 to just over $60 per barrel in 2007. .........(more)

The complete piece is at: http://www.prospect.org/cs/articles?article=did_your_car_cause_the_crisis

[notadmblnd]

1. We're supposed to buy this and not the greedy speculator side of it?

[Soylent Brice]

2. lolz

[Tansy_Gold]

3. Yes. . . . . and no

The speculators profited obscenely, but the demand was already there, created by urban sprawl, the popularity of the SUV and minivan, and the dependence spawned by years of cheap gas.

All of them combined into the perfect storm. Cheap oil led to development of suburbs and exurbs. Cheap oil led to development and popularity of gas guzzling cars. Cheap oil prevented construction and use of mass transit.

Development of suburbs led to cheap and sometimes fraudulent mortgages. As more people moved out of the cities, they needed more cars, bigger cars.

Cheap oil also permitted cheap importation of cheap goods from cheap labor countries. Cheap oil also permitted cheap plastic crap, petro-fertilizers to increase food production, and on and on and on and on and on.

Our insatiable thirst for cheap oil led to Gulf War I, and it's right in there with the causes of the sorry bloody mess we're in now in Iraq (control of mideast oil PLUS the insult to fundmentalist Muslim groups who see US presence in Saudi Arabia as an insult) and Afghanistan (oil pipeline territory).

The oil companies made us addicts, the the speculators just cashed in on our addiction. And instead of kicking our habit, we go into a panic if the price goes up to even half the level much of the rest of the world is paying.

Read Kevin Phillips' American Theocracy.


TG