Disaster = Dollar Devaluation + Continued Demand for Oil

[Pat]

.
It strikes me that the implications of American demand for imported oil demand a session all their own!!!

We are familiar with the "old saws" about implications for national security and our balance of payments.

And we even took a close look last fall, when discussing greenhouse gases and the use of coal, at how the use of any hydrocarbons (including either coal or oil & gas) is disastrous from the viewpoint of pollution -- carbons (think global warming), sulphur (think acid rain), or other (think smog, etc.).

AND HOW ELECTRIC ENGINES ARE FOUR TIMES AS DISASTROUS SINCE 75% OF THE ENERGY SOURCE FROM WHICH ELECTRICITY IS GENERATED IS LOST IN THE CONVERSION PROCESS AND THE EXTRA POWER PLANTS ANYWHERE IN THIS COUNTRY TO PROVIDE THE ADDITIONAL ELECTRIC POWER ARE INVARIABLY COAL FIRED!!! FOR EXAMPLE, ADDITIONAL ELECTRIC BUSES IN LOS ANGELES MEAN ADDITIONAL COAL-FIRED ELECTRIC PLANTS THAT EMIT 400% MORE GREENHOUSE GASES THAN PROVIDING THE SAME BTU'S OF POWER FROM DIESEL OR GASOLINE ENGINES, AND TYPICALLY MUCH HIGHER MULTIPLES OF SULPHUR AND OTHER POLUTANTS. THE ONLY OBJECTIVE ELECTRIC BUSES IN LOS ANGELES ACHIEVES IS EXPORTING THE POLUTION TO OTHER STATES WHERE CALIFORNIA BUILDS ITS NEW ELECTRIC PLANTS. BUT AL GORE WOULD TELL CALIFORNIA AND LOS ANGELES THAT, FROM A GLOBAL-WARMING PERSPECTIVE, IT DOESN'T MATTER WHERE LOS ANGELES GENERATES 400% MORE GREENHOUSE GASES FOR ITS ELECTRIC BUSES THAN WOULD HAVE BEEN GENERATED FOR CONVENTIONAL DIESEL-ENGINE BUSES INSTEAD!!!

But "back on message" quite a bit has been written recently about the dramatic increases (at least in terms of plummeting dollars) of the world price for oil, how those increases are driven by greater demand from emerging economies in China and India, and how world demand for oil is likely to continue to escalate.

There has even been quite a bit written recently about the future supply of oil & gas.

But I have seen nothing written about the old International Economics 101 caveat that if a country decides to permit its currency to devalue in order to increase exports and, hopefully, decrease imports, YOU HAD BETTER WATCH OUT AS YOU LET YOUR CURRENCY "GO IN THE TOILET" THAT YOU MAY ONLY BE EXACERBATING THE PROBLEM IF YOUR DEMAND FOR IMPORTS IS IMPERVIOUS TO PRICE!!!

To illustrate the old Intl Econ 101 caveat, let's take a look at our actual situation. Let's assume that our SUV owners will pay anything to keep their SUV's rolling!!! If you permit the dollar to drop by 50%, you have just doubled the dollar cost of the oil that will be imported (rather than having reduced imports because the demand for higher-priced oil is reduced). So now the hole we have dug is twice as deep!!! The question is whether U.S. exports (because their price in foreign currencies has dropped 50%) can increase sufficiently that we are even "treading water" -- taking into account that the foreign-currency earnings of our former level of exports already dropped in half because of the dollar devaluation.

This is pretty dry stuff!!!

But it may be the case that we have no economic choice!!! Particularly if you consider that we were already running a huge deficit for many years vis-a-vis the rest of the world. (Which has been fueled, incidently, by effectively borrowing from the Chinese to buy imported oil!!!) IF NOBODY WANTS OUR DOLLARS ANYMORE AT VIRTUALLY ANY PRICE, IT MAY JUST NOT BE POSSIBLE TO CONTINUE IMPORTING SIGNIFICANT AMOUNTS OF OIL AND GAS!!!

WHAT THEN??? ARE OUR POLITICANS, WHO HAVE NEVER WANTED TO GRAPPLE WITH THIS PROBLEM EXCEPT VERBALLY, UP TO THE TASK?????