Warning lights are flashing and sirens are blaring.
Residential heating oil prices hit $3.59 per gallon this February. Many consumers are spending $3,000 or more to heat homes this winter. About 30% of Pennsylvania homes use oil to keep warm and 90% of our transportation fuel is oil.
Stunningly the February 2011 heating oil price exceeds the February 2008 price of $3.30. At that time oil was on the way to $147 per barrel by July, 2008.
The current price is 73 cents or about 25 per cent higher than one year ago when residential heating oil cost $2.86.
And how much did one have to pay for heating oil two years ago, as the country's GDP collapsed by 6% in the first quarter of 2009, after plummeting by 5% in the fourth quarter of 2008? As national leaders struggled to prevent a depression, residential heating oil sold for $2.20 in February 2009. Today's price is 63% higher than the depressed 2009 price.
With heating oil now priced higher than in February 2008, the year when oil hit record levels by July, does anyone else see the flashing RED light and hear the blaring sirens?
Global economic growth has begun to stretch oil supply. Escalating political risk to supply adds to upward price pressure as popular uprisings topple governments in Tunisia and Egypt and challenge dictatorships in Iran, Yemen, Libya, and Bahrain. While answers are non-existent, questions abound.
Will the Shia of Saudi Arabia remain passive to their royal Sunni rulers? Will Iranian style dictatorships that may well use oil as a weapon replace governments in Egypt, Tunisia, Libya, Yemen, Bahrain, and even Saudi Arabia? Will instead popular uprisings lead to pro-western democratic governments in Iran itself and other key nations? Or will something between these two poles emerge? What do these scenarios mean for the price of oil?
I don't know what comes next in any of the countries of the Middle East. I suspect nobody has more than an educated guess.
But I will hazard this prediction: no matter what politically happens in the Middle East, whether it is religious dictatorship or democracy or something in between, the political changes will lead new governments to drive oil prices higher, if not use oil as an outright weapon to bring the West to its knees.
Thirty-seven years after the first Arab oil embargo America is now a bigger sitting duck, importing more oil than ever. See the Post "CNG: Saving $1.85 per gallon" to see what a travesty our situation is.