Obese obsession for oil!

One major factor in my budget allocation was GAS until today. It is quite unthinkable that the price of any commodity could fall from $140 to >$34 a barrel in four months. But again you might argue what about the stock price of GM? Very close comparison indeed. Agreed that we are going through tough time but $140 to $37.9 I still find this unimaginable.

As said in my first article on Hybrid cars – it is a known fact in American economy that the oil prices will shoot up during summer. But the prices one got to experience this year were not only unprecedented but it was solely to enhance stock portfolios of few and was guided by greed and favoritism. This kept building higher and higher until it reached $140. (http://en.wikipedia.org/wiki/File:US_oil_price_in_dollars_from_1999_to_2008_November_21.svg ).

This time around unlike the previous years the average consumer was taken for a ride of a life time and they had about had it. There was a complete reversal in human behavior to a point that you would get one of those “looks” from other commuters incase you happen to drive one of the gas guzzling SUV like GMC Yukon/Denali or Hummer for that matter of fact( I did not mean to point out SUV’s from exclusively GM but these are the biggest guzzlers out there). There was increased awareness of the environmental effects of fossil fuel (though this was not a desired or intended result), people stopped / reduced using cars and opted for mass transit. In some areas mass transit experienced record numbers in commuter traffic.

All this just for making bucks off hard working consumers – most hit was the middle class and the people below poverty line. Not only did they have to balance their monthly budget in terms of high gas prices but the average grocery bill just shoot up 20% due to the direct /indirect dependence on oil for transportation by the agro industry. Since oil affects almost every aspect of life, average living expenses shot up by 20%. Having to experience this in an economy that was not only in recession( though none admits to it) but with the mortgage and credit crisis plus looming unemployment number that was on rise from one month to the next, common Joe just couldn’t make it.

There was a paradigm shift in the way an average individual took to OIL in general. Over this past summer the very OIL that churns the wheels of this economy and is vital for the economy to survive took a nose dive in demand. Not only did the consumer grow OIL averse but they started thinking green and to large extent I would say GREENER and GREENER ( once agin this was not the intended result but the consumer awareness in green energy as we get to experience today has lot to do with the bad times experienced this summer, it just made you think how very dependent our day to living relies on oil) .

The administration did not see this coming, to favor a few in the Petro and its own investment in OIL stocks it went blind sighted in its greed and ultimately dug its own grave. Today the consumer has rejected SUV’s completely poor GM had to halt its Hummer production and not ONE SINGLE model produced by the American big three looks like would see the light of 2009 unless they receive a bail out by congress with tax payer’s money( the bail out got approved thing morning for roughly $17billion this morning, as I write this article).

When the population grew fatter – instead of practicing and professing better food habits and health awareness it was assumed and marketed that an SUV, CUV and big behemoth vehicles was the way to live. The car makers did not have any clue what was coming, with the reverse psychology playing a big part in day to day decision, people just started abandoning cars al together. Before we knew the bigger the better was totally un-cool and smaller the smarter was the selling point.

Now those egos have shrunk to an extent that they would fit in a car the size of Honda FIT!

But the bigger question is with TWO THIRDS of its population officially obese would a smaller car be better FIT? Or better - How would the obese America fit into smaller car the size of HONDA FIT?

I just realized that not only do we have to trim our dependence on OIL if we want to survive but we have to trim our WAISTLINE! America is not only the largest / biggest consumer of OIL in the world it also consumes >1/3 of everything produced with the highest rates of obesity in the world.

Hence not only should we curb our obsession with OIL but also consumption that has turned gluttonously obese. A better pragmatic approach to development needs to be defined and followed.

- Common Joe

Tumbling Trio

News of the Detroit Trio tumbling their way to bankruptcy is all over the news; with the $700 billion rescue package cleared by the congress every one wants a share of the pie. We have seen CC companies like American Express willing to forgo the freedom they had and to be much regulated and in their operations, to fall in lines with the rest of the banking sector only to get the slice in $700 billion. This was the most dramatic turn of the sub-prime effect so far, or so you think.

Does Transamerica ring a bell? Not many among us (I being an ardent NPR follower got to hear about them in an evening broadcast) might have heard about them. Transamerica is a Dutch insurance firm that operates in US. Keep in mind a DUTCH firm. Unfortunately they aren’t eligible to ask for $$$ from the rescue package because they are not federally regulated. What is the innovative way to become eligible – take over a low key bank that is federally regulated!

Dire means taken to get funding. Which gets me to thinking – Should the Detroit TRIO be rescued?

The trio represents the American acumen in manufacturing and specifically in automobile industry. Right from the day when Henry Ford rolled his model T to today it has been a roller coaster rider for all the three. The irony is model T performed at an average of 28 mile/gallon. With advancement in technology and more than half a century later there is not one model that the three produce that beats the performance of model T! Sad state of affairs indeed.

Somewhere down the line leading up till date these companies lost track of what the common man wants. They thought as long as they banter the slogan of patriotism people will buy cars. Every possible improvement was made to the car without having looked into the actual reliability and cost of ownership of these behemoth vehicles. The sole thinking was bigger the better. This strategy worked for a few years but when people started realizing the true cost of owning these vehicles when compared to Japanese counterparts, the patriotism campaign wasn’t after all selling many cars. Today we are at a juncture where in all the three have complicated union structure and massive unsold inventory never seen in the history of America.

After union negotiations and cost cutting, inclusive of downsizing these companies they are all at a juncture where unless some drastic measure is taken they might not see the light of 2009. When the $700 billion package was announced – I for one thought it was a lot of money ( for the most part I was counting the number of zero’s in a billion!). But in today’s economic crunch $700 billion doesn’t look like much if banks, automobile, credit crunch, insurance, mortgage all or any or few of these sectors have to be rescued.

If the Detroit Trio is allowed to fail then the losses will be in lines of 1.1 – 5.5 million jobs. This is taking into consideration all the related industries that directly or indirectly work with the auto industry. Right from companies that make tires, paints, parts, suppliers, couriers etc. Last but not least DMV, highway tolls and the list goes on, oops almost forgot ExxonMobil, Shell, BP.

Today we do know that the war fought in Iraq is going nowhere; we are not fighting terrorism but indeed creating terrorists of future. There are three wars being fought Iraq, Afghanistan and most likely new inclusion - Pakistan. Every month the cost of fighting the Iraq and Afghanistan war together stands at $16 billion. The country spends $16billion on wars that are not fetching anything. We jumped into it without knowing the compete facts and are paying a price by not able to support the very industry that forms the core of the US mobility.

For crying out loud the whole country was designed to sell cars, right from town planning to DIY network relies on the fact that everyone on America will have ( not own) a car as soon as s/he is 16.

Do you think the Fed should bail out the auto industry? If not. Why? After all AIG was saved with an unprecedented $125 billion ( and counting). Then why not the auto industry? Do we now discriminate among the lines of blue collar and white collar jobs? Or you think they have been saved enough and need to fall and file for bankruptcy to get on track!

Whatever you stance, I am sad that we had a government that has got us to a point that our investment in Iraq is beyond any sanguine comprehension. We can’t pull out of it even if we want to. While the whole economy is sinking – would you be able to guess one company that’s still reaping benefits? ------------------------------ How does Halliburton sound?

Common Joe.