Rough math. Those of you whom are more exact feel free to give me adjustments.

Current national average for fuel is about $3.19 per gallon. The price per barrel is 98.10. Roughly 3%.

Lets consider, just for a moment: $220 per barrel.

It’s not impossible. In fact at least one well known economist is aying that not it’s being under stated.

Libya supplies 1.8 million barrels of oil per day, and currently there are nasty rumors that Gadaffi want’s to blow the pipeline to the Mediterranean , this after having already shut down production due to the unrest there.

Saudi Arabia may and or may not have the production ability to reduce that lost. But King Abdullah’s health is not all that and a box of cracker jacks currently. Given the unrest in his region more could be on the way. (Although speaking politically, the Saudi royal family allied themselves with the church long ago so it is unlikely). While not as big of an issue, that situation still plays in the scenario. As does Algeria.

At $220 per barrel, cost per gallon would be around $7 per gallon of gas.
Your currently $3 milk would be almost 6.
Your bread, about 5.
All of your food goods could easily increase by 50%. Because they harvested, produced and transported all using fuel.

Imagine your weekly cost of your commute? For myself My current $120 per week in fuel would jump to over $300 per week…or half my monthly salary.

Your cable television would increase. Field crews drive trucks which need gas and they have to make up that difference somewhere.

Your phone? Even your cellphone? Same situation. Repairs and implements use fuel as do the generators that run them during power outages. All shortfalls that must be regained and 90% at the customers expense.

Tractor trailer companies would be crippled for a time. Some may go under. Owner operators would more than likely walk away at the massive increase in diesel combined with the recent CSA 2010.

What was previously called the middle class would be almost poverty level over night. The poverty level would become destitute.

Unless companies immediately reacted with raises for their employees, you must consider that 77% of America is living paycheck to paycheck.

If their entire cost of living increases 50%….they all but cease to exist.

How likely is this?

We are hovering at $100 per barrel currently. At $120 per barrel the 3 trillion dollar stimulus package is erased.

The largest oil spike in history occurred on September 22, 2008 was only $16.

While that means we shouldn’t see any $100 dollar jumps in a single day we will be able to see the steam roller coming down the highway.

Whether we will be able to get out of its way is another matter entirely.

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This entry was posted on Wednesday, February 23rd, 2011 at 15:38 and is filed under Finance. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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