In case you missed it, oil came close to $100 a barrel today. We've had a nice warm autumn here on the east coast, so oil prices have been fairly contained, however at $95+ you can be certain that downstream costs are going to be pretty darn huge, especially given that the dollar is devaluing so quickly. Heating oil is already scraping against $3.00 a gallon, and gas is not far behind.

In terms of preparedness, this might not be a bad time to ponder how much fuel you need and what you might need to NOT get in order to ensure a maintainable level of backup fuels. In storms, in emergencies, fuel is always a super important resource, and while storage and rotation is challenging, it's necessary. If you don't have a household budget worked out already, this would be a great time to work one out, because unless you don't drive and don't pay for your own heat, this energy cost increase WILL affect you, and it's not going to get any cheaper anymore.

So, find the money. For example, I know I cut out the purchase of a nice new gun ($1,200) I had wanted to get this hunting season because the vehicle fuel budget had to come from somewhere.
We also were super-aggressive in wood collection all year long, and we have a LOT of wood ready to burn - and the oil burner is switched OFF unless we're out of the home for two or more days. We're also burning wood like we don't have any left and piling on the blankets at night. Yes, it's 55 degrees in the house in the winter at night. We warm it to 72-74 during the day. My oil bill for all of 2006 was $200, and that was due to some heavy travel and our house sitter kept the house far too warm. I expect my oil bill for this year to be less than $100 if we manage things well.

It's crazy. I can work from home and have on occassion. I plan on mentioning something to "the boss" if it goes too much higher.

Geez Martin...an whole $200 dollars? That's my monthly gas bill during the winter...and I light fires. Two story house with young ones...gotta keep em comfortable.

Wish I could just operate on wood...be cheaper, but for now the fire is a novelty for the family..sure comes in handy when the power goes off though. Provides me an opportunity for impromptu survival training. Taking showers with boiled water (deer camp) my 10 year old was thrilled, playing games by candle light.

I concur...it's going to get crazy and the rest of the country with it.

A site that is quite informative with respect to oil/fuel is:
http://www.theoildrum.com/
Five years ago I thought "Peak Oil" was far fetched,
two years ago I was growing more concerned,
Last year I accepted most people are no more prepared for the future changes in the cost and availability of fuel than any other survival skill (equipped forum members excepted of course).
Lately I have come to terms with the very real possibility that barring some miracle, the US in particular is in deep do-do.

My work is oil and gas related engineering,sorry to say it's more real than not, and shortages are likely to persist and cost skyrocket.

You are so right about actual preparedness required to adapt to fuel/energy shortages.
The additional threat is social disorder in reaction to the shortage.

All it will take is some event to trigger a serious run up in price, if you think oil/gas is expensive now, it is instructive to remember that bottled water is more expensive by the gallon.

I fear we may all get a chance to practice survival skills in the future.

This is one reason why I work at home - and have 10-cords of firewood

Ahhh..Southern California winters. Whoops! its getting cold here at 60 degrees. Let me turn on my heater fueled by endless natural gas. Over here natural gas is king. All jokes aside, 1500 square foot houses can accumulate a monthly gas bill of $200 if they aren't carefull.

SOCAL winters are the only reason to stay here. We went last winter with the furnace off, I'm guessing we'll do the same this year. Just gives me an excuse to buy wool: underwear, sweaters, socks. . . a new Filson vest.

I dunno, this whole oil business stinks. I remember a discussion about the president's strategy regarding drilling and piping the vast reserves from up north somewhere, and how congress poo-pooed the idea right into the ground. I think this is the backlash from the administration.

I know this sounds all conspiracy theory and paranoia, but think about it, we've got a good 25 year + supply of sweet crude sitting on domestic soil just waiting to be had, and the president wants to go after it now to get us off the world market (read OPEC) dependency a little, and right away he is shot down. It's like he gave us two policy choices, in one hand he offers us all the oil we can use, with gas prices at $1.50 or less for at least the next decade, plus wielding a serious club over the other big oil producing nations and buying us a little more time to develop and deploy economically feasible technology which was already planned to be done, and in the other hand he puts us in a position where we become even more dependent on foreign oil, our economy starts going to heck in a decade, and we are going to pay $4.00 a gallon for gas before his term is up. It ain't a big stretch to think that his administration has been subtlely steering us into a "if you don't like my policy, then you are all going to pay" situation. Basically what he's done has had the same effect as telling the enviros he'll let them have their way and see how bad it can really get, especially by doing certain things globally that exacerbate the whole situation. Then when TSHTF he can step back and tell us all how he tried to avoid it but no one wanted to listen.

Yeah, that just seems to far fetched to me...

It's actually worse than that. Even if you don't drive or pay for heat it will affect you. Fuel costs drive up the price of every single thing produced/grown, and transported on the planet. So unless you are 100% totally self-sufficient you will pay one way or another.

It's a pain but we've been here before. Oil prices were higher in 1973 after adjusting for inflation and we survived that. But we absolutely need a long term plan to switch from fossil to renewable energy. A total national effort along the lines of the Apollo project. Benjaminn already touched on a way to fund it: drill domestically and use a portion of the profits to finance the R&D. Do Congress, the President, and the courts have the political will to do it? Not now obviously.....

The passed-along costs, especially to food, are getting out of hand. I mean, a loaf of bread for $4.00? Not to mention milk, cheese, meat, etc.

And farmers deciding to plant corn for ethanol instead of regular crops because of the profit difference isn't helping, either.

No end in sight for the foreseeable future.

Benjammin, if you think opening up the north to oil exploitation is going to lower the price of gas, help to deliver us from OPEC, and solve any of our problems, I think you're dreaming.

Right during/after the oil 'shortages' of the 70s, some people started thinking about alternative sources of power, like passive solar, wind, etc.

Then America, with its collective short memory, seemed to forget all that. They went from smaller, energy-efficient vehicles (some, anyway) to SUVs. Things (esp packaging) that were made from paper or glass went to oil-intensive plastics. Look at all the new houses they've been building: do they face south or do they just face the street?

First, we ruin the north (reclamation is basically a joke), then we find ourselves right back where we are now.

Yesterday, the price of gas around here was $3.24/gal. Do you really think that if we did open up that pool of oil you mentioned, that our greedy oil companies would LET the price go down? Oh, yeah, from $3.24 to $3.02. Big effing deal.

Sue

I'm not so pessimistic.

First of all, the advances that can be had in internal combustion engines have been held off by initial cost sensitivity of the American Buyer. 100MPG Diesel fueled vehicles are perfectly real, they are a little more expensive.

Tesla Motors has shown that an electric car is practical, fast and (for now) really expensive, however, the boogeyman of insufficient range is rapidly being scared off.

Growing food for fuel will soon be seen for the idiocy that it is, and we'll move to non-food crops and other sources for "bio-energy".

It's also pretty clear that worldwide, nuclear power is going to be a factor, as will allegedly "alternative" energy, which seem to be to be better called "expanded source" energy.

But I don't think all this is going to happen until we have a few years of $5 to $7 a gallon oil, which will drive investment, and even if there's "20 years of Sweet Crude" under US Soil, so what? I mean, I was in high school 24 years ago and it does not feel that long ago. 20 years is a blink when you look at the long view, especially when it comes time to change your national infrastructure.

We killed off trains and trolleys in about 25 years, what's to say we can't do the same to an oil-based transportation infrastructure? I mean, really, what's to say that we don't take those idiotic HOV lanes and turn them into something that's somewhere between a street-car and a bus, it goes 60 to 70 MPH, it's something equipped with ultra-capacitors, rides on rails bolted to what used to be an HOV lane, and has a charging system that works in 60 seconds or less at each station? Heck, I could even see stations as a self-contained solar-powered thing that tops off the ultra-capacitors or flywheels in between road trolleys. Plop this into the median of the interstate and you have something that could work - drive your expensive vehicle to the station, and have a road trolley come every 3 to 5 minutes.

Nope, too late for the oil prices to take a plunge now that the damage was done. We had a choice, 7 years ago. The administration gave congress the choice then, go after cheaper oil up north and resume some control over our own energy destiny, or we'll make the economics of NIMBY go through the roof. Congress went green, and the administration is now making them pay the price.

We have several huge global contractors now trying desperately to mobilize into Alberta and expedite the processing of the tar sands up there to recover crude. Some of the execs are weeping at the thought of how much money they aren't making right now that they could be. Yet the price keeps going up and up, so they aren't hanging themselves just yet.

I don't subscribe to the forgetfulness assertion either. Simply put, the alternative sources have limited application and suffer many headaches of their own. I've worked for a few energy companies that have invested heavily into R&D for decades for alternative energy sources and only recently came up with something significantly better than what was available in the 70s. We were researching alternative fuels in high school in the late 70s along with folks at Western Washington University trying to find ways to make alcohol and Hydrogen work in a piston motor, and it's taken some meticulous research to overcome some of the physics problems we faced then. There, too, I don't ever remember there not being big V-8 driven vehicles since the early 70s selling just as fast as they ever did or have up till now. In fact, I'd say the percentage of gas guzzling vehicles on the streets today is less than it was 2 or 3 years after the big embargo. As far as I can tell, smaller energy efficient vehicles have not diminished one little bit on the market. One thing I will note is that we have managed to squeeze a lot more efficiency out of the smaller motors. It was too much to ask to sacrifice a minimum level of performance for economy back in the 80s, but by the mid 90s the engine displacement size was almost cut in half, while the HP rating stayed pretty much the same. It has only gotten better as time went by.

I reject the notion that reclamation is a joke. In fact, if anything, the mandatory environmental investment required today for any sort of operation would dramatically improve those ecosystems that would be penetrated were we to go after the new domestic supplies. Maybe it was a problem 40 years ago, but the environmental propaganda of the media has little basis in fact anymore. Yeah, there are still problems. There are still risks. Nothing is foolproof, so I guess we will just do nothing instead?

But you are right, now that we are where we are, don't expect anything to fix it anytime soon. Sometimes we as a nation have to learn a lesson the hard way. We were offered a way out, and we slapped the helping hand away, so now we get to sit in the muck and the mud for a while and think about the cost of all that righteousness.

Personally, I wouldn't mind going back to horse and buggy days, although if you check the history, you'll find that wasn't such a pleasant way of life either.

My point was, we had a chance at it, and we blew it. I don't expect them to be very accomodating now that we are all moaning and groaning while they continue to haul wheelbarrows to the bank. They pretty much have us by the base of our snarglis, and they know it, and they have no reason to let go.

The yield numbers are better for non-food crops too. Switch grass returns better than double the ethanol compared to corn.

Before we hit the road, we could heat our 1500 sq ft house, located at the 2100 ft level in the Sierra, for about $300 a YEAR on pellets for our pellet stove. Little bit of electricity to run the fan/pellet feed, and a mini-amount of propane to run the stove and water heater. Of course the pellets came from Oregon, and a truck brought the propane, the increased fuel costs will have an effect on that...

It's been surmised that much of the current price of oil has more to do with speculators than on the actual supply of crude oil. If that's the case, the price will come back down fairly soon.

The problem is that each time this happens, the price never goes down to where it was before the nonsense started.

This will become a recurring theme unless the buying public wakes up.

Which brings to mind another phenomena.

Except for techonolgy (computers, cell phones, TVs and DVD players), when was the last time you saw retail prices go down instead of up? No matter what happens to the value of the dollar, the price of fuel or electricity, or anything else out there, it seems like all the prices at the supermarket just keep going up, and never really come down. You might get a bump on produce when it's in season, or the occasional spif sale or stock clearance, but by and large, consumables just seem to keep going up and up. It has been like this all of my life, and I gotta wonder, what does it take for prices to drop?

People say that a nickel don't buy what it used to, and I guess that's because folks didn't have as many nickels as they have now, so it seems like the economy has been in this long, constant runaway where the more money they make, the higher the cost of the goods and services they need. What a vicious cycle. Is it some reciprocating market thing, or is it just that everyone is so greedy they are afraid they won't get their fair share if they don't keep hiking the prices up? It doesn't even seem like supply and demand anymore.

There's a reason costs continue to go up.

It's called inflation and it's the result, primarily, of a Fiat monetary system and centralized banking. When "money" isn't tied to real value like gold or silver, the supply of cash can be increased at will. This gives those who receive the money first (banks, oil purchases, military and other governmental contractors) a big chunk 'O fun and an unfair advantage as that money spreads out and hits those at the bottom of the pyramid as a hidden tax when it now takes $2 to buy a $1 loaf of bread. Rinse and repeat and you have wholesale inflation.

There's a reason the Fed doesn't publish the M3 anymore and reported inflation is pinned to all the wrong things. Real purchasing power has waned far more than we are led to believe and that has only accelerated. Now that the dollar's bottom is falling out and gold is skyrocketing, there's going to be real consequences the world over as our lenders pull out of holding what amounts to printed paper without value.

Actually, the price of a lot of things has gone DOWN over the years.

Food is, on the whole, cheaper (in every definition of the word) today than it was in 1980.

Telecommunications might SEEM more expensive, but that's because when you were a kid, you had A SINGLE PHONE. We have two land lines, four cell phones and DSL service.

Fuel costs were low through the 1990's.

What's really increased is costs in healthcare.
My health care plan has a $5,800 deductible and $3,408 a year in premiums. None is covered by my employer.

Insurance costs have increased as well, my homeowners and automotive policies have increased a lot.

I guess if you've been putting off projects like replacing old, single-pane windows, replacing an ancient furnace, and other modifications that will increase energy efficiency, sooner is probably better than later with current energy prices, too. If you rely on fuel oil deliveries and other utilities to keep the house warm, then a well insulated home will stay warmer longer if something disrupts those supplies. Obviously, it won't stay warm forever, but better than in some creaky, leaky home.

I really should replace the old single pane windows in my new house.

Do the international loans have inflation clauses in them?

All I can think of was a really silly movie I saw once, can't even remember what it was, where everyone wanted Canadian rather than US dollars on the black markets. I thought it was funny then....

Wasn't Reagan a real master of that "taxation via devaluation" approach? IIRC he said he wouldn't raise taxes, then kept the treasury slaves up till the wee hours printing reams of bills.

Yes, without sticking to a standard, the mint is fairly loose, and it seems, as you say, the trend is only gaining in popularity.

I thought I'd acknowledged earlier that the techno stuff is the exception. If not, then let me say now I concur with your observation there. However, for groceries, I am certain that prices have only gone up on pretty much everything since the 80s. Gallons of milk are double or more of what they were then, same with eggs, meat, bread, but most especially produce. I know when my kid was born in 89 I was buying good ground beef at about 80 cents a pound on average in three different locations in the US. I haven't seen it below $1.30 for even the cheap stuff on sale for at least 3 years now. Maybe I have been in the wrong markets. It just seems like the prices never come down, just up and up and up...

I'm not sure about inflation clauses, excellent question, but my guess is that it's doubtful. There's inherent risk in trading currency, and the dollar has enjoyed a tremendous run as the worlds backup currency for decades. I think that run may be at an end and the local and global consequences will show up soon.

Just look at Zimbabwe's alarming inflation and the utter economic devestation it has caused. I might also add, that if history is any indicator (and it is) - every fiat currency EVER created has failed in precisely the same way. It sounds good up front, you can drive expansion and growth, up until leaders with no restraint take it to the next level. A return to a gold and/or silver standard would be the only way to hold politicians in check from creating money from thin air, devaluing your buying power (the hidden tax I spoke of earlier) by causing rampant inflation.

Actually, the sad thing is that Congress is the ONLY entity granted the power to mint money under the constitution and has no authority to re-grant that authority to some other entity. It has done so in naming the Federal Reserve (neither Federal, nor a "reserve"). So, in reality, the politicians don't really inflate it anymore, the central bankers at the Fed do. Oh, and the Fed no longer reports the M3 to tell the politicians overseeing it how much money they have printed. So when you lose 13 Billion in printed bills in Iraq and nothing comes of it, I wonder just how little a drop in the bucket that was. If that wasn't enough to scare the crap out of anyone who lives in the US or uses US currency, 10 out of the 12 banks that comprise the Fed are owned by non-US entities.

I'd say buy Canadian, but buying any real hard and trade-able goods (gold, silver, bullets, etc.) is the only hedge. And *some* things have gone down in price due to cheaper overseas manufacture, but I do a lot of the shopping for my family and I can assure you that in the last 7 years or so, most things have increased in price quite a bit. I used to be able to take my family of 3 out for a meal for $15. Now I'm lucky to get out for under $25 or $30. The $15 was as recent as 3 years ago.

I'm pretty sure it started with Nixon, but yeah, Reagan cranked up the cash machine.

One of my favorite quotes on the subject:
"Although the gold standard could hardly be portrayed as having produced a period of price tranquility, it was the case that the price level in 1929 was not much different, on net, from what it had been in 1800." – Alan Greenspan, December 19, 2002

You're right, Nixon abolished the gold standard. From what I understand, every president from Lincoln on abandoned the gold standard during times of war to print more money. Anyway, here's a clip from an interesting article.



http://www.lewrockwell.com/orig8/wallach4.html

From the Austrian school of economics;
http://www.mises.org/story/2780
pretty much covers inflation which is really running around 10 percent by the way.
One of the funny things is the Government inflation numbers EXCLUDE;Fuel,Food and medical as these are too volatile.

We will all be reading more on this as the Financial outlook gets more gloomy.

Stock up on the wood and supplies.