THe 3 F CRISIS

obmar · THe 3 F CRISIS

FOOD

FUEL

FINANCE

http://mostlyflying.blogspot.com/.../3f-crisis-food-fuel-finance.html

Sunday, May 11, 2008
The 3F Crisis: Food, Fuel, & Finance

The 3F Crisis: Food, Fuel, & Finance :

Yes, I know that the "3Fs" is part of the punch line of an old joke with some excellent advice (that I have managed to violate in every way!).

But, 3Fs also describes the crisis in fuel, food, and finance.

The "3F" Crisis is a useful shorthand. I would like to take a view of the impact on individuals in the US with some support from anecdotes.

Here in South Florida, our stone crab season runs until May 15. But, many stone crab fishermen have stopped pulling traps. It's not because of a lack of crabs or because of high fuel costs... it's a lack of buyers. Usually, the supply/demand curve is tilted the other way. Usually, in Miami, people are waiting in line to GET stone crabs in the limited season. Not now. Demand for this premium non-essential product is soft.

Disney reported better attendance at theme parks than last year. "We're definitely benefiting from the dollar exchange rate" Iger said.... and added there wasn't yet any evidence that higher gasoline prices had hit attendance at the parks."

I have a link to a FL Dept of Health article saying that ~20.9 % of adults smoke US-wide and 17.4% smoke in Florida. (2006 numbers) More recent figures (no link) are higher in Florida. It's easy to find statments and statistics (see tobaccofreekids.org for example) showing that higher cigarette costs reduce cigarette use. Yet, the high percentage of tobacco use among adults continues despite the years of "education" on smoking, the very high out-of-pocket cost of tobacco, and the recent general loss of disposable income.

The US Military, led by the Air Force, is trying to go to coal-to-liquid fuel plants in places where they make sense.. such as Montana. The area south of Malmstrom AFB is rich in coal that is easy to mine. The USAF has been trying to build a coal-to-liquid plant there for years. "Concerned Citizens" complain about the use of water and the creation of CO2. While trying to move away from carbon-based fuels is laudable, why not use our abundant sources of carbon (e.g. coal) to meet necessary demands like the military?

These anecdotes and others say to me that the "3F" crisis will have the consequence of pulling all of us away from the fringes. The fringes of spending, consumption, and dogmatic causes. Those who make a living on the fringes will suffer the most.

This is no great news. It is Maslow's Hierarchy of Needs applied to economic life. Most people will quietly pull back to the core needs.

--Local non-essential businesses (e.g. local restaurants) powered by US dollars will suffer most.
-- Anything that can be powered by Euros or other non-dollar-pegged currencies (like Disney) will do well.
-- WallMart is in for a sales boom in the basics.
-- There will be an "alternative energy" bubble, burst, and glide.
-- Carbon-based fuels are here to stay for a long time. The battle between the oil industry, which wants to keep its oil assets priced high, and the coal industry will take place in Congress and it will be awful to watch. Oil will join with its unlikely friends, "concerned citizens", to try to keep the coal buried.
-- Common sense (i.e. consensus) may become more common as we pull back from the edges. - Political fallout will further reduce the faith in Congress and the presidency.

There is a 50/50 chance that the political result ("consequences") will be benign or catastrophic for the current form of government. This is an important time.

One possible out ... IF the technology of sun-to-electricity really does benefit from Moore's Law (see previous post) then... it could be happy days are here again!

Links:
http://money.cnn.com/news/newsfee...djf500/200805061812DOWJONESDJO...
http://www.doh.state.fl.us/tobacc...iles/2006_FLATS_Cigarette_Use.pdf
http://www.meic.org/energy/coals-to-liquid-fuels/malmstrom-c2l

The Inquisitor

It is a strange time we live in, that's for sure. I'm used to seeing the US at the top of every important market statistic, and to see the dollar in almost freefall, the economy depressed, and the world moving away from the dollar is brand new for me.

I guess the era of US dominance is nearing its end.

obmar

we were recording some higher inflation figures in the last two months here in malaysia,
mostly because of food prices and fuel prices

The Inquisitor

obmar,

It's only going to get worse. I watch the gasoline prices at local service stations around in the area. Just a few months ago the prices were at around $3.50/gallon. Now they are at $4.20/gallon and rising. I also discovered another interesting fact. I always use my bank's debit card when I fill up (there are no service station attendants anymore in California). The last few times I pout in exactly $75. The first time I thought this was extremely curious, but the second time it happened I knew there must be more to the story than a simple coincidence that I would need exactly $75.00 to fill up my tank on two separate occasions and within days of each other.

Apparently the credit card companies won't reimburse merchants more than $75.00 per transaction on any bogus or fraudulent credit card purchases. Therefore, the service station owners won't allow cars to put more than $75.00 worth of gas in their car when using a credit card.

The main item here is that the recent meteoric rise in gas prices have yet to be felt in the market place, even though truckers and other shippers are already paying more in fuel prices and are most assuredly passing that increase onto the stores. Within the next few weeks watch for signs of inflation in the US and an already bruised economy in a quick spiral downward out of control. Who knows how far this thing will drop, but drop it will.

obmar

Those that have wont sell
Those that does not have wants to stock it up.

Food Crisi gets worse by some recent disasters in China and Myanmar

obmar

Now the diesel cost is already about the same as petrol.

Once it was about half, but roadtax for diesel is about double to thta of petrol.

And I drive one diesel SUV.

The Inquisitor

And we are now at $4.60/gallon with no end in sight. The cost of transportation has yet to reach the store shelves, but when it does, we are going to see double digit inflation.