SAR #11109

We are easily fooled into thinking that we are not being fooled.

Demanding Supply: Saudi Arabia has reduced its output by about a million barrels a day, claiming the market is 'oversupplied'. It is oversupplied with $110 oil, and those who can afford it can buy lots. But $60 or $80 a barrel oil is hard to find. Gasoline is over $4 a gallon in the US and oil is well over $100 a barrel on world markets. The modern industrial world is completely dependent upon cheap accessible oil. Globalization, consumerism, suburban sprawl, food production and distribution, and all means of transportation are dependent upon oil. The US has already stepped up its payments to the oil producers by an annualized $100 billion. ExxonMobile's CEO says that the price today represents the increased cost it will take to replace the current supply. JPMorgan says that demand will increase by 2.7 mbd by August and that if supplies are not sharply increased gasoline at $5 a gallon in the US is inevitable. The only way the market is “well supplied” is because those who can't afford $100 oil won't be buying any, leaving lots for those who can afford it.

Noted: Tim Geithner: “It Would Be Catastrophic If People Start To Doubt Whether The U.S. Can Pay Its Obligations.” And, yes, I know the government can always print enough dollars to “pay” the debt, but you can bet nobody would lend them another farthing for a long, long time.

Failure to Farm: If gasoline and diesel prices remain high (or go even higher) food prices will rise with them and some forms of energy-intense farming will no longer be profitable. Think tractors, planters, harvesters, trucks, refrigeration.... Hoe, hoe, hoe.

The Lucy Moment: At least 30% of Medicare expenditures come in the last year of life, much of it in the last month. Is this a reasonable burden to place on the country? Who will take the football away? Why don't we hear these same complaints from the do-gooder socialist countries of Europe?

Revised Standard Version: Estimates for 2011 real, annualized growth have descended from the 4.0 range to 1.75% and falling. And that's before petroleum goes to $145 or whatever. 

Signs& Resigns: Wells Fargo's CFO has resigned, joining Bank of America's CFO who developed an urgent need to spend more time with his family last week. Are bank CFO's resigning rather cook the books sharpen their pencils any further? Are banks trying excessively hard to spin dross into silk? Mortgage debt is no better than it was quarters ago, and may be worse, and the backlog of delinquent yet un-foreclosed homes continues to grow. Maybe it's nothing, just a convenient time to take up sailing.

Progress: The European bailout of Ireland is going so well that Moody's has downgraded the rest of Ireland's surviving banks to “junk” status.

Plot Lines: The last days of the British Empire were not the last days of the British Empire, nor the best days, either. A horde of documents detailing the horrific measures taken to cling to empire as long as possible were gathered up, then squirreled them away in a house in Buckinghamshire, from which they have suddenly, and embarrassingly, surfaced.

Texas Two Step: Gov. Rick Perry, who wants Texas to secede from the union, first wants the President to declare Texas a disaster area and send lots of money. Then go away.

Alphonse and Gaston: A spade having been called a spade and the Ryan plan exposed for the cruel nonsense that it is, the Republicans want an apology. For what? Is one of our two major political parties run by people so immature that they will refuse to do what the country needs because the president hasn’t been nice to them?

Another Thing: Stockpiles of edible oils are expected to drop to their lowest level since 1974 – just enough to meet 23 days of demand. Prices will climb. Maybe this is a good time to think about a low fat diet.

Porn O'Graph: How high is too high?