Oil was a mere $2 a barrel back in 1967. This week oil topped $83.50 a barrel on one day of commodity trading on the international markets. Consumers can expect to really feel these record oil prices when the weather turns cold and they will pay as much as 20% more to heat their homes this winter than last year. For many persons it will become the choice between paying the mortgage or buying heating oil. If we have a very cold winter, then oil prices will likely go even higher yet as supplies could tighten.
Motorists will likely feel major pain at the pump as well very soon as gasoline becomes short in supply as gasoline switches over to winter blends with ethanol content. And on the international scene, Israel's attack on a suspected North Korean built weapons site in Syria may have just been a warmup to a larger attack on Iran later this year, a dangerous move likely to ignite major problems in the MidEast as well as drive oil up to as high as $100 a barrel and make both driving and heating oil break all time price records.
Another major problem will be exactly how the Federal Reserve Board will respond to any "inflationary" pressures created by huge oil prices. The Federal Reserve Board recently lowered the key interest rate by 50 basis points, however commonly uses higher interest rates to curb inflation rather than recognizing huge increases in a commodity such as oil as a sign of economic crisis driven inflation, and not some purely greed driven inflationary pressure.
Another sinister omen is that like clockwork, an economic recession for the U.S. has always followed a period of sharp cost increases to oil within a two-year time frame at most. High energy prices compete in the U.S. marketplace and drive away buyers from retailers. The last round of high oil prices resulted in some retail corporations such as Wal-Mart noting declining retail sales.
There appears to be enough sinister signs building that a perfect storm related to expensive oil may soon ensue, creating an economic crisis in many American households will struggle with whether to pay the mortgage or pay for heating oil. Retailers may witness a very bleak Christmas this year with less seasonal jobs available than usual as well. Unless oil prices can quickly roll back, the American consumer may witness some very serious conditions within a few weeks and some serious economic problems will build.
Note: Wizbang Blue is now closed and our authors have moved on. Paul Hooson can now be found at Wizbang Pop!. Please come see him there!