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U.S. imports of oil have skyrocketed from 28% 30 years ago to 49% in 2010 [and if
the price of crude oil were to skyrocket it would have devastating effects on the economy but be advantagous to the savvy investor. Let me explain.] Words: 368
So says Katchum (http://katchum.blogspot.ca) in edited excerpts from his original article* (which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.)
Katchum goes on to say, in part:
If oil prices were to double we would see:
- the U.S. trade deficit double too, more or less, given that oil imports contribute about $US100 billion/quarter towards the trade deficit which is 65% of the total trade deficit,
- the net earnings of different enterprises go down as production costs went up,
- tax revenues of the U.S. government decline resulting in
- an even higher U.S. government budget deficit,
- higher food prices (the world population is still increasing exponentially and would only start to decline in year 2040 (see Chart 1 below))…as 25% of all heavy goods transportation costs in the U.K. are due to the transportation of food while in the United States, transportation costs account for 14% of the total energy consumed by the American food system.
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| Chart 1: Population curve |
- the economy come to a halt as transportation (the “life blood” of the economy) accounts for more than 60% of the oil demand in the United States (see Chart 2 below). Today, households use at least 1/5 of their income on transportation. If the oil price were to double, every household would spend almost half of their salary on transportation.
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| Chart 2: Oil Demand by Sector |
- higher inflation,
- a declining dollar because the alternative would be an increase in interest rates which would cause a crash in the banking sector and housing market.
- commodities like gold, silver, copper, zinc, potash, etc…rise in value.
To benefit from higher oil prices it’s safe to say that commodities are still your best friend.
* http://katchum.blogspot.ca/2012/03/what-if-oil-prices-double.html (To access the article please copy the URL and paste it into your browser.)
Editor’s Note: The above article has been has edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
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