Reply #25: Critical imports [View All]

[rustydad]

Many of the imports that drive up the current trade imbalance can be curtailed for a time with little adjustment in life style for the middle/low working classes. Most widgets from wally mart are garbage soon enough anyway, bound for the landfill. But oil, well that's a different story. We need to import 60%+ of our oil which mostly goes into transportation needs. As the infrastructure in the US is hugely dependent on cheap oil here is where the SHTF. As we cannot quickly adjust to more fuel efficient transportation systems our need for oil will not be reduced. Prices will soar for two reasons. One is that as the dollar falls in world currency comparisons the oil exporting countries will simply charge more in dollars. Second we are entering the period of demand exceeding supply. Possibly we are at peak oil world wide. In any case the exporters will control the price, essentially selling what there is to the highest bidder. With a falling dollar can we outbid Europe, China, even India for the share of oil we need? Not likely. The high cost of oil (my guess is $100+ a barrel end of 2005) will ripple through the economy driving inflation ever higher. Cost of our exports will decline because of the weak dollar but that decline will be offset by higher fuel costs. So we will not return to balance of trade positive. This all has the smell of a vicious circle that spirals down, down, down. Is there a bottom? and if so how hard do we hit it? Bob