The Departure of Prosperity
Today I spent the day driving Kim, Thomas and me up to Pasadena to see Kim’s family. Before going I went for bagels and cream cheese and to fill up the tank of the car with gas. It’s 107 miles to our nephew’s house in Pasadena, and with the small detour through West Hollywood to see Gary & Oswaldo for a late lunch, we would cover 260 miles. At an average 23mpg in our Mercedes GLS 450, that represents 11.3 gallons of premium-grade gas. My fill-up of 20 gallons cost me $112 at the price of $5.60/gal (I paid $5.10/gal to fill up the motorcycles on Saturday on the Rincon Reservation). That meant that a simple, but longish Sunday drive to see family and friends cost me $63 in gas. This was based on a crude oil price level of about $125/barrel, which just went up today on Ukrainian War-based Russian oil embargo impact to $139/barrel. While that is still off the $147/barrel high that was hit in 2008, it is getting close and may well breach that level as this accursed war goes on and the world gets madder still at Putin.
This has been a wild ride of late, with crude prices getting as low as $40/barrel in mid-2020 as the COVID-induced slump in oil consumption put us in deep over-supply territory. While we overreacted (imagine that, markets overreacting to presumed bad economic news), that didn’t stop us from doing what battered businesses do, we shuttered large portions of our oil production supply chain on the view that COVID may have changed the world and we no longer needed all the shale oil production we had teed up. Huh! The tyranny of the virus has been displaced by the tyranny of the madman. Both are phenomenons of nature, and both lead to disruptions to our way of life as we know it. It’s hard not to ponder what this all bodes for our futures. What will govern the world and our lifestyles the most? Governance is the third leg of the ESG stool with environmental and societal issues driving outcomes while governance divines how those impacts drive policies that alter our lives and restrict our personal freedoms one way or another. No indicator of ESG importance is more poignant than crude oil price (deriving gas prices and much more thereafter) and it should remind us of two important winds that buffet our lives in real time. One is the absolute impact of fossil fuels on our well being. We crave it for our freedom to travel (even to just see family and friends) and we simultaneously despise it for what it does to dampen our lives through global warming and all the horrors (mostly wildfire risk at our local level).
The other thing that is putting a crimp in our lives is authoritarianism. Strangely enough, the arguments set forth by the likes of Putin and Xi (not sure why they even bother to rationalize when everyone knows it’s only bullshit they are spewing on the idiot masses), is that the volatility of the economic world of today does not allow democracy to prosper the way the informed and nimble autocratic rule method of governance can boldly accomplish. Wow, bullshit squared. I certainly see why less ponderous souls might be swayed by this simplistic logic, but really, just open your eyes and you can see the self-fulfilling prophecy of it all. Putin is creating the volatility himself and Xi is endorsing it (eyes on Taiwan, thank you very much) and then declaring that only he and his one-man rule approach to governance can react to it adequately. And furthermore, the problem is best solved by enriching oil-rich and gas-rich countries like Russia to hold sway over the world regardless of the environmental impact of it all in the long run.
As the wildfires rage and the surging sea levels swamp the coastal world, even mother Russia is seeing its permafrost tundra devastated to the point of hindering oil and gas production in the northern Siberian regions. How ironic is all that? Can human beings do more to bite off their noses to spite their faces? Oh, yes they can. They can carry the tiki torches of freedom and white supremacy as far as the Capital steps and chambers on 1/6/21 in the name of heaven, in order to suppress the rising tide of egalitarianism and demographic reality, thereby stopping the clock of human progress for the comfort of an idyllic past that was less than idyllic for the the growing majority of the population of the Earth.
Rather than continue this rant against the ills of the world, as I am prone to do almost every day these days, I want to explore the personal impact this is having on my psyche and my pocketbook. I don’t like paying $63 for a Sunday drive any more than anyone does, but that simply doesn’t rattle my chain so much. I lived through the Arab oil embargo in the early 70’s and waited in line for gas rationing, so paying $5.60/gallon fifty years later doesn’t get me so exercised…especially since one of my cars is electric and my solar and battery set-up keep my electric bills very low or non-existent. Additionally, when you look at oil and gasoline prices on an inflation-adjusted basis over the last fifty years, it really doesn’t look so horrible and it certainly averages out over the COVID era to being about level with the past decades. No one is going to claim that we have been wracked by horrible inflation in the past 30 years, especially since at least half of the worries have been about deflation during those times. But I recently had a car buying exercise that set me off about costs.
I have a five+ year old Tesla X with 13,500 miles on it (just driven locally). I paid an outrageous $113,000 for it, a price I never thought I would pay for a car, but I was rolling in dough at the time, I guess. Earlier in 2021 I considered trading it in and got a trade-in bid of $55,000 from Tesla. Blue Book showed as $58,000. The other day I valued it on Kelly’s Blue Book and got a value of $68,000+. At the same time, since my Tesla CyberTruck $100 deposit seems to be leading nowhere until at least 2025 (I am one of 1.25 million people thinking of buying one), I put another $100 down on a Ford F-150 Lightning electric truck. First of all, I should note that putting down $100 feels like not picking up a penny on the street. Sad, but true. Second, Ford may be old-fashioned, but they at least send me email updates on the order reservation. The other day they sent me one and said they would be in touch soon and I should be able to order the car for delivery this year. I used that as an excuse to delve into what I might order. I had already rejected ordering a Rivian since that takes a $1,000 deposit and the vehicle costs $80,000+. Both the Cybertruck and the Lightning say they start at $39,999. When I fully priced the Lightning online I found out that they had four models ranging up to a base of $90,000+. For a freaking FORD TRUCK! After I calmed down I worked the online system and found that I would have to pay $68,000+ to get a first-year model electric Ford truck that had some but not all the bells and whistles. I’ve decided to wait and see what I can trade the Tesla X for straight up at Ford. If it doesn’t work, I will just keep the Tesla and live without the truck (but I will get my $100 back!) In fact, maybe I ought to ask Tesla for my $100 back as well.
What all of this has made me realize is that there has been a departure of prosperity from out lives, but that it doesn’t come from the $5.60/gallon pump cost. It comes from our culturally limitless wants. I have a good life and have enough, as John Bogle would say. But it is so very easy to slip into the not-enough camp when you aren’t paying attention. I imagine I will still debate the truck issue a bit more, but I’m thinking it might be more important to start simply enjoying life as I have it rather than as I somehow feel it could be if only….