Anybody else shaken by yesterday's $11 single day jump in the price of a barrel of oil? On Tues. and Wed., oil was heading down, into the low $120's a barrel, and then, boom, up to $139 in two days. Then the Dow drops 395 points, its biggest single day loss in 15 months. Yesterday was the first day I got really shaken about all this. Not that I won't be able to fill my gas tank or heat my house — I'm fortunately in a financial position to not having to make those choices, like some people are, about whether to heat the house, buy food or fill the tank.
My general worldview since I was a youngster is that the American economy is strong and resilient and behaves in a relatively rational manner. This isn't Argentina or Russia, this is the U.S.A. I also want to believe, possibly naively, that our government has its hand on the tiller, however lightly. But what's happening now just has a crazy and uncontrolled feel to it. Sure, you economics and finance types have explanations about the dynamics of these commodities markets, including oil. And I've read a lot of the commentaries. But I just don't have that settled, 'everything will be fine' feeling. Where, oh where, is FDR wrapped in his sweater giving a comforting fireside chat to the American people? It feels like the leadership of this country has all boarded a space-ship to la-la land and left us ants to fend for ourselves. (Caesar fiddling while Rome burns also comes to mind. Of course, the friends of our current Caesar are probably happy as clams, raking in the profits from the oil run-up.)
Long term, this oil run up will likely have positive effects. Our government, beholding as it is to big business, never had the political will to mandate substantially higher fuel economy standards for vehicles. But consumers will, by eschewing vehicles with poor gas mileage. Hummer houses and McMansions will likely give way to smaller, more energy efficient houses — the average new house size in this country was under 1,500 sq. ft. until the 1980's. Homeowners will finally take energy conservation seriously, and do the insulating and retrofitting and window replacement that's been long recommended, to save every gallon of oil they can. I expect this winter we'll see a lot more thermostats turned down to 68 or 65, and a lot more sweater sales.
But long term is just that — long term. In the shorter term, there are an awful lot of challenges to adjust to the new reality.