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Stocks Tumble as More Bad Economic News Piles Up

NEW YORK - Wall Street plunged Thursday, hurtling the Dow Jones industrials down to their lowest point in nearly two years as investors contended with a barrage of bad news: a surge in oil prices past $140 a barrel and warnings of trouble in the key financial, automotive and high-tech industries.

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Oil Jumps Above $140 on OPEC, Libya Comments

NEW YORK - Oil futures shot above $140 Thursday after OPEC’s president said crude prices could rise well above $150 a barrel this year and Libya said it may cut oil production. The advance raised the likelihood that gasoline prices would also extend their advance, and that prices of goods and services throughout the economy would also keep rising.

Light, sweet crude crossed the $140 level minutes before the New York Mercantile Exchange closed Thursday, then retreated slightly to settle up $5.09 at a record $139.64. In after-hours electronic trading, prices rose as high as a record $140.39.

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Take a look at this article….

$7-a-gallon gas, 10-million fewer cars: Rubin

MATTHEW TREVISAN

Globe and Mail Update

June 26, 2008 at 1:47 PM EDT

A new forecast calls for gasoline prices to hit $7 (U.S.) a gallon in the next two years and oil to soar to $200 a barrel by 2010.

The report by CIBC World Markets also predicts there will be 10 million fewer cars on the road in the United States by 2012.

“Over the next four years, we are likely to witness the greatest mass exodus of vehicles off America’s highways in history,” Jeffrey Rubin, the lead author, wrote in Thursday’s report.

Economist Benjamin Tal, who co-authored the report with Mr. Rubin, said Canadians can expect to pay about $1.85 to $2.00 per litre of gas at the pumps by 2010.

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After reading this news article and letting out an OMG!, I visited Our Friendly Earth again to read Joy’s post, The Price of Gas and Public Transit.  So here’s another dilemma….how are all those people who have to give up their vehicles going to get around? As Joy pointed out, in Kansas City the public transit system is woefully lacking. In addition, what about rural Americans? At present, most small towns can not support the employment needs of their population, which demands the breadwinners to drive to larger communities. What are they going to do?

Yesterday I had some pretty devastating financial news that has me questioning my two year haitus from teaching. We had planned for me to be a SAHM until DD graduates next year, however because of one little…itsy, teensy letter (well actually it was several pages thick) that I received yesterday…those plans may have to change.

So today, I find this article….and…the neighbors could have heard my OMG! What the heck will I do if THIS happens? two streets over. 

A quick, in my head, calculation gave me a rough estimate of what it would cost me to drive to work every day….close to $27 a day! As a substitute that would be almost 1/2 of my daily net pay…as a full time teacher…about 1/3. How in the world is that going to work? Okay…I realize it is not THAT bad for ME…I will at least have some amount of money left over after stopping at the pump…and unfortunately be netting less than minimum wage….but again (tell me if this gets old here)….how in the sam-hill are younger families, minimum wage earners, the elderly on fixed incomes going to survive this?

My thought is the rural areas will suffer greatly with population declines. The Ghosts Towns of the Old West will now have competition from every state. People are going to have to move where they can find employment and be able to either walk or take public transit. So there’s a new dilemma. Kansas City cannot not be the only large city with deficient public transportation. Will the cities be able to handle the influx of new residents?

When I was much younger, and before I actually understood the ramifications of public administration, I lived in a suburban city of Dallas, Texas. Public transit was on the ballot for our city. Proponents wanted to offer public transportation from the bedroom community to the inner city, however, those opposed argued that public transportation would bring poverty, thus crime to the area as well as raise the sales taxes. I believe that suburban city still does not offer public transportation (outside of a taxi). So what is suburbia going to do?

What are we ALL going to do?

Today I had a great comment on my $4 Gasoline post by Joy at Joy’s Victory Garden and Our Friendly Earth, that got me to pondering an issue that I have addressed here before. With the inevitable $4 gasoline, and the possibility of the rising cost not taking a downward turn anytime soon, what are average Americans going to do? Choices will be made…choices born out of fear and exasperation.

My concern with $5 gasoline is that people will have to choose between buying a gallon of milk or loaf of bread and buying a gallon of gasoline. Without fuel, people will not be able to afford to drive to work. If a person doesn’t work, then what? There are assistance programs, but I am certain it is not enough.

DH drives 36 miles round trip for work everyday. He drives an older vehicle with terrible fuel economy…but that is our only choice at the moment. Just cipherin’ in my head, I come up with a monthly expenditure of around $200 for him to drive back and forth to work. It is not proper form to tell you what percentage of his net income that actually respresents, but let’s just say….I would much rather that be going into a college savings fund instead pouring out into the environment. There is no choice for us for now, we will keep paying the amount, whatever it is, so that DH can earn his paycheck.

What about other’s who do not have other resources to offset this enormous budget buster? For a minimum wage employee, almost one hour work will pay for a gallon of gasoline. I am thinking that most minimum wage workers drive older less fuel efficient vehicles. Using the same scenario as DH’s, except on minimum wage, the percentage of net income spent on fuel is approximately 25%, a percentage that was once reserved for the most important issue of your budget…housing. Rising fuel costs added to a fixed rent figure could skyrocket to a 60-70% of a minimum wage earners net salary. So that puts us at 85-90% of salary….hmmmm….what about child care (I am thankful I do not have to worry about this expense), medical, and ummmm…let’s say FOOD? There’s another hit below the belt. Milk is as much as gasoline and bread/eggs not to far from it.

I am not an economist….and there is much I do not understand about inflation, recession, supply and demand, but one thing that I recognize with our current situation and where it is headed is that we are in deep stuff here. I think I could ramble on and on here with what ifs. It seems…and I realize that I will most likely be corrected in the comments section….that we have a full viscious cycle building larger and larger….like a thunderhead in the distance. If people are put into a position of making choices of whether to purchase gas to drive to work, or to feed a hungry family, what will that choice be and what are the ramifications of the choice? No work? No paycheck! No paycheck? No food or housing! Then what? Subsidies are available, but will they continue if a the need becomes greater? Certain jobs are filled with minimum wage workers (right or wrong) that will otherwise not be filled by anyone else. What will happen if the need for employees is not met? What if, what if?

I don’t know the answer. Do you? One thing I do know, it that I am watching the lightning strikes…..1….2….3…..and counting the moments…1…..2…..before I hear the thunder…..1……and I believe it to be a prudent time to take cover! There is a different kind of storm a-comin’!

Gasoline averages around $3.85 a gallon here in Southwest Kansas, but this past weekend we bought our first $4 a gallon gasoline. Okay, let me be exact, we paid $3.999 a gallon in Gardiner, Kansas.

I read somewhere that by July 4th weekend, fuel would be $5, but I am hoping that is all just hogwash. Even paying $4 is HOGWASH!