Wednesday, November 10, 2010

Impact Now - Energy and Economics

There is a tendency among otherwise reasonable people to think things have turned around for our nation, ever since the Obama administration got a "shellacking" at the polls on Nov 2nd.

Some things have changed, some things haven't. Energy is one of those things that has not changed. Supply and demand. And while energy usage demand is just chugging ever upwards, supply of cash via the nation's printing presses just expanded.

I see rumblings of the economy coming back to life ... in China and India. China is buying up commodities, as well as our debt. Especially important next year is Chinese import of coal, copper, and food. Food became important when the Russians lost 20% of their wheat crop this past summer.

With money supply rising, and energy demand rising, I see the value of the dollar decreasing and the price of energy getting a double dose of inflation.

This effect will be almost immediate, and will be felt before next spring. I don't know if this was built into the price of oil when I did my forcast last July, so I don't know (yet) if this will have an impact on that forecast.

The top three uses (not in any particular order) of energy by the average family are (1) their motor vehicle (2) heating and air conditioning and (3) food. These are the area's in which to concentrate efforts to get the most bang for your buck (so to speak).

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