Oil Shock Inflation

[OlderGiantFan]

We're all familiar with the topic of inflation, and have experienced it. I don't want to go into the causes too deeply because you get bogged down in monetary inflation analysis and banking machinations. But one thing certainly leads to inflation, and that is Oil Shocks. The 1970's was unbelievable as far as inflation was concerned. I was young then but even I noticed the house prices and car prices going up and up. But of course, wages went up too didn't they, unions were still strong back then so the net effect wasn't that bad. In fact it was Great if you'd bought a house in 1970.

But all that aside, I watched the disruptions caused by the global shutdowns back in 2020 and now these Oil price shocks are upon us. Already many textile and plastics manufacturers have shuttered their factories across Asia, and today I read this tidbit.

A little more than a week after Emirates Global Aluminum, the Gulf's largest aluminum producer, halted operations at its Al Taweelah smelter following Iranian missile and drone strikes, EGA has declared force majeure on parts of its contract book, signaling that supply chain disruptions are spreading beyond energy markets and into industrial metals. EGA accounts for 4% of the world's aluminum production. The broader Middle East accounts for about 9% of global aluminum supply. Aluminum futures on the London Metal Exchange have surged 50% from a year ago and prices may go even higher.

And this news: "IMF Warns Iran War Will Slow Global Growth, Raise Inflation, And Worsen Food Insecurity"
When the IMF talks I tend to listen because their forecasts are more accurate than some of the mouthpieces out there. oilprice.com/Energy/Energy-General/IMF-Warns-Iran-War-Will-Leave-Lasting-Scars-on-Global-Economy.html

So what are we doing personally? I don't mean complaining and cursing and writing letters, I mean actual on-the-ground actions to mitigate some of this in our personal lives. I for one have stocked up on aluminium pushbikes I did that before the 2020 hikes came through actually, and recently bought ebike parts, my motor etc and some extra tires etc, enough to last me a few years anyway. Inflation reduces the purchasing power of my money so I might as well spend some now on things I'll need in the future. Even stocking up on some LL foods like honey and dried beans, expensive jams and the like can save me money over the near term until our incomes 'hopefully' catch up a bit with this next big round of inflation.

Before the actual fuel hikes I could see the writing on the wall and bought a few months worth of fuel. I haven't had to visit a service station for well over a month now so I dodged the crazy hikes there. In the scheme of things these little savings add up to real savings, and after that it's no doubt cutting back on some regular consumables like steak etc. There are some very tough times ahead I feel.

 

[hillslayer@]

Civil war in the USA is there end game. Just think if the Internet had been used to educate people instead of brainwashing them what the world would have looked like.

 

[99t4]

So what are we doing personally?

Personally getting the "Victory Garden" into shape and volunteering at local community farms. Food shortages (or at least disruptions) are a possibility. Industrial farm fertilizers production and transport seem to have been upset.

And of course, all of us will be paying the upcoming "transportation fuel surcharge" as most everything we buy from the supermarkets have been transported several times by OTR diesel trucks. Example: Seed warehouse ===> farm ===> silo/warehouse ===> processing/packaging plant ===> warehouse ===> supermarket. Not much room for modification in today's Just In Time supply paradigm.

 

[yooper2001]

Personally getting the "Victory Garden" into shape and volunteering at local community farms. Food shortages (or at least disruptions) are a possibility. Industrial farm fertilizers production and transport seem to have been upset.

And of course, all of us will be paying the upcoming "transportation fuel surcharge" as most everything we buy from the supermarkets have been transported several times by OTR diesel trucks. Example: Seed warehouse ===> farm ===> silo/warehouse ===> processing/packaging plant ===> warehouse ===> supermarket. Not much room for modification in today's Just In Time supply paradigm.

And there I was pissed today because the base Commissary finally went woke and started charging 25c a plastic bag......so I had to pack in a pile of cloth walmart sacks that cost 87c a piece...but can reuse.

 

[OlderGiantFan]

Personally getting the "Victory Garden" into shape and volunteering at local community farms.

Good plans. I'm surrounded by farms, but that doesn't mean I can access them if it's just going out the gate on trucks to the city markets. I must renew my efforts to make contacts with them. I began a few years ago, buying eggs and veggies from the farm-gate but then they stopped selling to me and other 'outsiders' for various reasons. We do have a community garden but it's a small affair and right on the main road into town lol. More of a novelty activity than a serious project, about a tenth of an acres worth.

 

[OlderGiantFan]

Just think if the Internet had been used to educate people instead of brainwashing them what the world would have looked like.

Well it certainly educated me. I was talking with a neighbor today who was relating how his brother is in all manner of financial distress with the high interest rates and business dropping off and I tried to explain how the majority will always be in that boat because of their personal greed's. Wanting to live beyond their means with debt basically. How can you feel sorry for 97% of the population who dug themselves into a hole. That was the first lesson I learnt 20+ years ago off the internet. Get out of Debt, and have a good savings stash. You'll Never hear that on the TV. Run a personal spreadsheet budget, don't waste money on crap like holidays and fancy hotels unless you can really afford it. A sort of personal austerity.

This is the TV message



Those sane voices have been all over the internet but the vast majority didn't want to listen. People behind on the mortgage, boo hoo, and what's with the fancy nails? "Oh I have to have my nails done, you have to have some little luxuries." Cable TV, coffee out, all of it adds up to personal financial disaster if you don't plan head. I was lucky in the sense that I heard the message and took it onboard, I shared the message with all the close friends and family too. But no one cared, they all wanted to live on like it was 1999. So be it, none of my business.

 

[offGridDownUnder]

I lived in Wellington, NZ for a while. The city is built into a natural bowl, very hilly, and there isn't much opportunity to spread out. I also heard from the locals that for most of their lives, the economic situation in NZ was rather even - there wasn't so much inequality, and life was peaceful.

From that, I did a thought experiment:

Imagine a society where everyone has enough. No one lacks for food, warmth, transportation, sporting and recreation, health cover. But no one is much better off than anyone else. There just is no reason for discontent - there is no lack, no hardship.

For a given population, that translates to a certain size for the economy, for the money circulating.

In a situation like that, how do I get rich? "Rich" always means "richer than" - if everyone has the same, no one is rich.

To get rich in that situation, there must be more money available than needed to cover the people, so that someone can have more than another. How do you get more money into the community when no one is lacking?

You get people to want things they don't need.

 

[hillslayer@]

Well it certainly educated me. I was talking with a neighbor today who was relating how his brother is in all manner of financial distress with the high interest rates and business dropping off and I tried to explain how the majority will always be in that boat because of their personal greed's. Wanting to live beyond their means with debt basically. How can you feel sorry for 97% of the population who dug themselves into a hole. That was the first lesson I learnt 20+ years ago off the internet. Get out of Debt, and have a good savings stash. You'll Never hear that on the TV. Run a personal spreadsheet budget, don't waste money on crap like holidays and fancy hotels unless you can really afford it. A sort of personal austerity.

This is the TV message

View attachment 387191

Those sane voices have been all over the internet but the vast majority didn't want to listen. People behind on the mortgage, boo hoo, and what's with the fancy nails? "Oh I have to have my nails done, you have to have some little luxuries." Cable TV, coffee out, all of it adds up to personal financial disaster if you don't plan head. I was lucky in the sense that I heard the message and took it onboard, I shared the message with all the close friends and family too. But no one cared, they all wanted to live on like it was 1999. So be it, none of my business.


View attachment 387190

What I learned from the Internet is money is a cult . It was a way to enslave the masses for the benefit of a few. If the values of a market economy designed to enrich a few, changed to treat everybody fairly and use resources to make a more livable planet instead of war and consumerism,the world would be a much better place.

 

[OlderGiantFan]

What I learned from the Internet is money is a cult . It was a way to enslave the masses for the benefit of a few. If the values of a market economy designed to enrich a few, changed to treat everybody fairly and use resources to make a more livable planet instead of war and consumerism,the world would be a much better place.

Well you'll have to wait for the second coming of Christ to see that.

 

[neptronix]

I had to drive a new Dodge Ram 1500 recently to move some stuff.
It has a realtime MPG readout in a tiny font.
I'm getting 15mpg in this thing going up a 1% grade and feathering it at 35mph.

Our gas is about $4.25/gal in Utah at the moment..

We drive a total of 30 miles in slightly congested suburban conditions, minding the speed limit, and the truck consumed $10 of gas.
Whereas in my little Mazda 2 with a stick shift i'm spending more like $4 because i'm still averaging 40mpg while half ass hypermiling it

I can't imagine using a truck to commute any significant distance frequently. But tons of people drive them out here like they were commuter cars..
Could not wait to get back into my small car and go back to being mostly oblivious about the price of gas.

 

[99t4]

I can't imagine using a truck to commute any significant distance frequently. But tons of people drive them out here like they were commuter cars..

Not only that, but they are racing (not literally) stoplight to stoplight, seemingly without thinking about it.

 

[hillslayer@]

Well you'll have to wait for the second coming of Christ to see that.

Because everyone is super happy with the current system.

 

[OlderGiantFan]

Because everyone is super happy with the current system.

Basically, the majority are. Even homeless in tents fly the flag out front, believing in the American way. Whatever that is? I read once that the average American doesn't hate the rich, on the contrary, they often worship them. "Elon Musk." They are not against the rich, they just want to aspire to that level themselves. Many consider themselves temporary embarrassed millionaires. Look at all the crypto Bros, they talk 'honest money' out of one side of their mouth but then they talk of the Lambos and expensive houses that they will buy once their coins go to the moon. They want something for nothing, just like the rich get. The current system sucks but it is what it is to use a favorite phrase of the Millennial generation. It's end is nigh though, blind freddy can see that. It was built on Coal and Oil and it won't outlive those reserves, no matter what Elon Musk and the mouse pushers at Google say.

This is just the latest iteration of a pattern that has repeated itself over and over and over. Once you realize that you can make plans and move on. Which is a lot more productive than dwelling on a matter fixed in stone.

Why were the Romans behaving so aggressively toward their own people? It can only be explained by the extreme inequality that characterized their society. It is estimated that during Imperial times, the Roman elites (roughly 1.5% of the population) controlled perhaps 15-20% of total income. The slaves formed about 20% to 40% of the population, while most commoners lived near the subsistence level.

The Age of Cruelty: Looking at Ourselves in the Mirror of History

Why did the Empire go that way and collapse? They ran out of abundant resources, food and Gold and slaves 1# And military overstretch 2# And they imported millions of migrants, free and bond, to do all the menial work, migrants that weakened the Empire 3#

Sound familiar?

 

[OlderGiantFan]

Not only that, but they are racing (not literally) stoplight to stoplight, seemingly without thinking about it.

And why did they all buy trucks and not little rice-burners? They chose to, no doubt heavily influenced by marketing. Pickups are the Huge Profit makers for Ford and Chevy. It's in their interests to sell more of them. Of course most buy them on Debt, something I find very very strange? Why would you go into debt for a personal car? It makes no sense to me but most do it. Over there and even here now. Home equity mostly. When people lose their homes the first thing I think of is have they used it to borrow for cars, holidays, renovations? No one put a gun to their heads. They were living in a dream world and were forced to wake up.

But this is all too serious, time for a little humor

 

[99t4]

And why did they all buy trucks and not little rice-burners? They chose to, no doubt heavily influenced by marketing.

Yup. Depends on the TV show of course, but TV commercials have long been dominated by appealing scenarios of shiny colorful awesome SUVs tearing it up in what looks like the Grand Canyon or other iconic landscapes. Freedom and Conquest!

 

[OlderGiantFan]

Yup. Depends on the TV show of course, but TV commercials have long been dominated by appealing scenarios of shiny colorful awesome SUVs tearing it up in what looks like the Grand Canyon or other iconic landscapes. Freedom and Conquest!

lol, freedom and conquest, I love it, and it's quite true. I watched a youtube promo for some adventure bike ripping down a dirt road in a valley, shooting across a shallow stream, water blasting up into the sky. Then the rider stops and pulls off his helmet and you see him surveying the countryside, master of it all. Shots of small birds, lizards and butterflies are added in for the wilderness effect and I wondered how many lizards ended up squashed under the wheels, butterflies smeared across the windshield? How many native fish did he mince crossing the stream?

Here's a good one

 

[OlderGiantFan]

The major Aussie supermarkets have announced that there will be serious food price inflation over the next year, due to the oil crisis. They never even said that over the covid supply shocks. What they failed to add is that 30% of the world's internationally traded nitrogen fertilizer and urea also comes through the straight, and it stopped a couple of months ago. But beyond that, Russia controls up to 40% of global ammonium nitrate trade, and when this all started it stopped exports of the fertilizer too, to ensure sufficient supply during their spring planting season they said. It was one month initially, then two, and now exports are capped. Exports will no doubt go to friendly countries, SA etc.

Interesting times ahead. Stock up on beans and rice while they are still cheap me thinks.

 

[marty]

Oil Shock Inflation?​

Are you filling the shock on your bicycle with oil? Sad day when the oil leaks out of a shock absorber.

 

[neptronix]

The major Aussie supermarkets have announced that there will be serious food price inflation over the next year, due to the oil crisis. They never even said that over the covid supply shocks. What they failed to add is that 30% of the world's internationally traded nitrogen fertilizer and urea also comes through the straight, and it stopped a couple of months ago. But beyond that, Russia controls up to 40% of global ammonium nitrate trade, and when this all started it stopped exports of the fertilizer too, to ensure sufficient supply during their spring planting season they said. It was one month initially, then two, and now exports are capped. Exports will no doubt go to friendly countries, SA etc.

I have a few indonesians who write software for me, a few ware asking for big raises to cover the cost of living there.

I wonder - aren't there some other ports these things can be shipped out of?

 

[OlderGiantFan]

I have a few indonesians who write software for me, a few ware asking for big raises to cover the cost of living there.
I wonder - aren't there some other ports these things can be shipped out of?

Fertilizer? Well China is actually the biggest producer, by far. But they restricted fertilizer exports, specifically urea to ensure domestic food security. Russia has done the same. The actual exporters now are few and far between, most big produces are hoarding it. But to address your Q directly, Kuwait was a big exporter but it's stuck up the end of the Persian gulf and all ports feed down pass the straight of hormuz. I guess they are just stockpiling it for now? But Kuwait has other more pressing problems. It's been under attack from Iran too.

 

[offGridDownUnder]

I guess they are just stockpiling it for now?

Following on, for this and other commodities (fuels, plastic ingredients, etc.) from the Gulf, there is a limit on storage and then production (refinery, factory, etc.) must actually shut down. For most of the processes, they can't be restarted quickly or easily - pipes must be flushed (which means e.g. large quantities of solvents which are not usually stocked and must be transported), etc.

This change point may have already occurred for many products and it won't be long until this point is reached for all of the products involved here. After that point, times to recovery begin to be measured in months. That is, no petroleum or fertilizer for months. Nations are already stockpiling and banning exports of these resources.

Given that the food growing season is generally a year long, we'll start having step-function responses - food production will fail for at least a year, etc. Personally I am aiming for 6 months of food storage - and oatmeal is very satisfying and does not need to be eaten with sugar - it's a grain and it goes well with tinned sardines.

The other major step-functions that will begin occurring will be about re-distribution of remaining resources and population migration. I'm a person reading news and today I read that the actual world-wide drop in petroleum amounts to about 10% of the total. This isn't that large, but it is very unevenly distributed - not every entity can get what it wants. Militaries will want their fuel, richer economies will be able to pay more for it to try to keep their economies going (whether that helps or not - if there is no one to trade with, it's just consumption and masturbation). As a consequence, there will be substantial energy and fertilizer deserts, and the people there will not go quietly into that good night.

There are already reports of significant unrest in some nations and militaries will become involved in disputes with neighboring countries over food and water and even just rumours ("those bastards are the problem!") as well as over the actual procurement and guarding of fuel supplies. These secondary consequences will also interfere with the provision of food and will reduce trade, resulting in hardship and retreat in all economies.

Finance and economies don't run on physical laws, they run on trust. I won't loan (and thus forgo my monies) to be repaid a year from now if I don't know if the other party will be around to do that. As a consequence, trade stops very quickly when people lose trust. There is a very real reason the "small government, dammit!" Republicans threw $700 billion of government money into the markets in the space of a month in 2007 in the US - screw the principles and never mind the hypocrisy, the economy was about to crash, trade was stopping, and it was a lack of trust - brought on by the lack of regulation, and therefore the lack of certainty, in the financial system due to removal of existing reporting and reserve requirements or the refusal to require them of new financial instruments (lowered banking reporting and reserve requirements and no reporting on CDOs and such fabrications).

Humpty-Dumpty will not go back together again, and pretending will not change this. It's not just that we won't go back to the way it was, we're also no where near the end of the difficulties which have been set in motion - most of the pain is ahead still.

I can see one benefit to all this (for me) - I'm living in a country that exports food, and this may go a long way to getting all these frocking drivers off the roads and society moving towards a sustainable economy instead. As an article also noted, "the cure for high fuel prices is high fuel prices". About bloody time!

 

[hillslayer@]

Basically, the majority are. Even homeless in tents fly the flag out front, believing in the American way. Whatever that is? I read once that the average American doesn't hate the rich, on the contrary, they often worship them. "Elon Musk." They are not against the rich, they just want to aspire to that level themselves. Many consider themselves temporary embarrassed millionaires. Look at all the crypto Bros, they talk 'honest money' out of one side of their mouth but then they talk of the Lambos and expensive houses that they will buy once their coins go to the moon. They want something for nothing, just like the rich get. The current system sucks but it is what it is to use a favorite phrase of the Millennial generation. It's end is nigh though, blind freddy can see that. It was built on Coal and Oil and it won't outlive those reserves, no matter what Elon Musk and the mouse pushers at Google say.

This is just the latest iteration of a pattern that has repeated itself over and over and over. Once you realize that you can make plans and move on. Which is a lot more productive than dwelling on a matter fixed in stone.
The Age of Cruelty: Looking at Ourselves in the Mirror of History

Why did the Empire go that way and collapse? They ran out of abundant resources, food and Gold and slaves 1# And military overstretch 2# And they imported millions of migrants, free and bond, to do all the menial work, migrants that weakened the Empire 3#

Sound familiar?

You leave out one key difference, the Internet didn't exist nobody has to believe the lies they are told the truth should prevail at some point in time.

 

[OlderGiantFan]

You leave out one key difference, the Internet didn't exist nobody has to believe the lies they are told the truth should prevail at some point in time.

Correct. Nobody has to, but they want to lol. They want free stuff, BTC to the moon, social security, dreams of Martian bases and everything like that. The opposite of all that, a world without a FED or a stock market or Big Government is austerity, people having to do it all on their own. No hub motors from anywhere! You have to mine the aluminum and cast it yourself, make copper and somehow refine it and turn it into enamel coated wire. Microchip control? Forget it. Lipos, forget it. That's all factory stuff made by loaning money from the corrupt banks.

The land of opportunity. One day some enterprising young man rides West and stakes out land for himself and starts raising cattle. It's hard work, but eventually, with the aid of some hired hands he builds a big ranch.
Now he's a cattle Barron and everyone hates him.

 

[OlderGiantFan]

... Personally I am aiming for 6 months of food storage - and oatmeal is very satisfying and does not need to be eaten with sugar - it's a grain and it goes well with tinned sardines.

I have bags of it too and recently added more, but I hate sardines so I have lots of sugar and milk is always available.

I can see one benefit to all this (for me) - I'm living in a country that exports food, and this may go a long way to getting all these frocking drivers off the roads and society moving towards a sustainable economy instead. As an article also noted, "the cure for high fuel prices is high fuel prices". About bloody time!

Well we live in the same country and the world is still kicking on. Look at the deals we've made with China for extra fertilizer, with Singapore for refined oil product. Even the Americans are sending tankers full of Gasoline. We're very sheltered down here, just 27 odd million people sitting on a mountain of coal gas and minerals. All the things the rest of the world wants hey. We'll do ok, nothing surer. Just look at fuel prices. Petrol is back where it was under $2/L while America's is still 50% higher than before. By the way, Red tractor quick oats are my favorite but homebrand aussie oats are probably the same and are cheap as chips. I'm still buying cheese at under $10/kg. Nice tasty IGA cheese too.

 

[neptronix]

Fertilizer? Well China is actually the biggest producer, by far. But they restricted fertilizer exports, specifically urea to ensure domestic food security. Russia has done the same. The actual exporters now are few and far between, most big produces are hoarding it. But to address your Q directly, Kuwait was a big exporter but it's stuck up the end of the Persian gulf and all ports feed down pass the straight of hormuz. I guess they are just stockpiling it for now? But Kuwait has other more pressing problems. It's been under attack from Iran too.

Damn, this is bad to hear. I'm sorry that the government i pay taxes to is responsible for this. This war seems to hurt everyone including us, but SE asia and Australia seem to be taking a large amount of the beatings since they are so dependent on imports.

Hope to see this end soon.