Preparing For the Costs of A Potential Energy Crisis

With the tension in the Middle East and the September 14th drone attack of Saudi Arabia’s Abqaiq oil refinery and Khurais oilfield, a lot of us are wondering what the future will bring. The attack knocked out a whopping 50% of the Saudis oil output or roughly 3.5 million barrels per day. This means 5% of the world’s oil supply is suddenly not available.

When one of the world’s largest oil producers and shippers is knocked offline due to a major attack, that is a serious escalation of the battle over shipping oil in the Middle East.

I find myself pondering what if it happens again? What is stopping further escalation and an even more long term oil disruption?

After all, one of my jobs is to think about the what if’s and try to help you be more prepared to weather the storm. I can’t help but wonder if the attack on the shipping terminal is not the beginning of a much larger storm.

Since I started writing this, at least two other refineries have experienced explosions or fires. These fires and explosions occurred in Mexico and Italy and appear to be accidents or flukes, not anyone purposely causing trouble. It is still worth noting because any losses around the world just add to the problem of less oil making it’s way to others.

Please note that this article is as up to date as possible at the time of writing. As new developments and facts emerge, some things may change. I have the same access to sources as you do.

Preparing For the Costs of A Potential Energy Crisis

Who did it?

There are varying theories out there as to who attacked the Saudi oil shipping terminal. First, it was reported to be Yemen and now a lot of sources are saying Iran. At this time, there has been no ironclad confirmation. Today Saudi Arabia is holding a news conference to present evidence that Iran is behind the attack.

That being said, Iran has stated numerous times in the past that if they cannot use the shipping lanes to export their oil

“America should know that we are selling our oil and will continue to sell our oil and they are not able to stop our oil exports. If one day they want to prevent the export of Iran’s oil, then no oil will be exported from the Persian Gulf.”

Iranian President Hassan Rouhani during December 2018 televised speech during a trip to the northern Iranian city of Shahroud. Reuters December 4, 2018

Back in July, I wrote the article “Oil Tanker Attacks In The Gulf Of Oman & What It Means For The Preparedness Community”. The attack or seizure of tankers is an ongoing problem.

Everyone needs to prepare for the potential consequences of escalation in the Middle East.

Who sent in the missiles doesn’t really matter in terms of how you can prepare and insulate yourself from the consequences of less oil on the worldwide market or a very volatile market.

Preparing for this situation is a good idea for everyone regardless of who did what or where their political sympathies lay. Higher costs and possibly another oil crisis will have an effect on us all.

But wait, Sam, didn’t the president just release oil from the strategic oil reserves? Won’t that stabilize the markets? We are a net oil exporter, so why should we worry or prepare for a potential gas crisis?

So little of our oil actually comes from Saudi Arabia that it seems odd to many that the price of fuel could go up so fast even if half of the Saudi production is shut down. According to data from the US Energy Information Administration in 2018 the United States imported 9% of its oil supply from Saudi Arabia. This comes to about 900,000 barrels per day.

One also has to consider that some of the oil we produce cannot be easily refined using the refineries we have in the USA. Check out this article in The Atlantic for more information on oil refining in the USA.

When discussing oil, it is important to know what we get from the average barrel refined in the USA.

At least part of our production comes from fracking. Of course, this method is heavily under fire for the environmental impacts it has and the unknown future consequences. Fracking is also a very energy-intensive way of producing oil so unless the cost per barrel is high enough, it is not profitable for companies to do. So while we have oil, it comes at a cost and possibly even a net energy loss depending on the markets.

Regardless of how much oil we actually have in this country, we are still players in a worldwide market.

If another country bids higher for oil, the tankers are going to head their way or we will have to outbid them, thus the price will go up as high as anyone is willing to pay.

Using our reserves will help in the beginning for sure but how far are we going to dip into the reserves before the powers that be say that the price is just going to have to go up a lot more?

The 1973 oil crisis occurred in a far different country than the one we live in today.

I wasn’t around in 1973 but I get the impression people liked to drive more. It was more enjoyable and done for fun. People did not have a lot of technological magic to entertain them or ways to socialize without being in the same space.

It is also telling how much the average commute to work has increased when you compare statistics from the time period of 1973-1981 to 1997-2005. According to the study “32 Years Of Housing Data” prepared for the U.S. Department of Housing and Urban Development Office of Policy Development and Research, the percentage of people with commutes of 10-29 miles rose 7.2% on average while those with a 30-49 mile commute rose 2.7%.

I am willing to bet that plenty of you reading this article know someone that has an even longer commute than that. Since going to and from work is something that most people are not going to be able to reduce, this makes a lot of households far more vulnerable to increased fuel costs. Sure cars burned a lot of gas back in the 70s but people just didn’t have to go as far in many cases.

A Reuters article from 2014 estimated that 600,000 people in the USA had commutes of 90 minutes or 50 miles or longer. That is a lot of time spent in the car and a lot of fuel especially considering that the average miles per gallon (mpg) in the USA (trucks and cars included) was 24.7 mpg as of 2017 according to Motortrend statistics.

In 1973 the average was 11.9 mpg but improved to 13.4 mpg after the fuel crisis. That is pretty awful gas mileage compared to now but we are driving further.

Between the flooding in the mid-west and the rising fuel costs, we need to be looking at the big picture when deciding what items should be purchased sooner rather than later.

Pet and livestock feed

For those with pets or livestock, it is a good time to consider what you have on hand to get them through the coming winter. There are many predictions pointing towards a particularly cold and snowy winter on top of the other issues we are having to deal with. The amount of volcanic activity over that last year was enough for me to think back to all the previous times that volcanic activity affected the weather.

At the moment grain prices for livestock are not so bad. Dog and cat food is the same as what I have been paying for quite some time. I don’t expect that to last. It is my prediction that commodity-based livestock feeds will go up first and then pet foods will follow.

Food

A lot of our food is sourced from a long distance. If oil prices go up, so will your food costs. Some food items may not be on the shelf when you go to the store. Canned vegetable shortages at stores have been very common. Stores have put up signs that it is due to a poor harvest. Canned foods cost a lot to ship and don’t always have a huge amount of calories.

A single can of Green Giant Mixed Vegetables has 135 calories. While I love mixed vegetables and I know people like to put them back, if the price went up from $1.30 a can to $2.00 a can, I would have a harder time justifying that expense for a mere 135 calories. Canned food lasts for years. I advise buying items like this now so you have them to eat on during times of poor harvest and higher costs.

Work from home at least part of the time if possible.

Some jobs can be done at home. I used to be a financial planning assistant and although I moved from Alaska, I kept my job there for a year after that despite being in North Carolina. While some employers may not want you to do it all the time or may want you to check in every few days, you might be able to save a lot of time and fuel by working from home at least a few days a week. If you have proven yourself at your job and do well working alone, telecommuting is a great thing.

Carpool

If you have co-workers near enough to make it worthwhile, carpooling is an option. If you own a business you may want to encourage workers to figure out carpools if you see they are suffering the consequences of high prices.

Use the most fuel-efficient car you have access to.

If you have a household with multiple vehicles, try to use the most fuel-efficient one for the longer trips and commutes even if you don’t like it as much as your other vehicle.

Take public transit at least part of the time

I know a lot of people don’t have good public transit but if you do have access, it can help.

Bicycles and Mopeds

Alternative transportation such as a bicycle or electric bike is nice and provides varying levels of exercise. A regular bicycle with a basket allows for some cargo space too. Mopeds are inexpensive and allow for good maneuverability in towns and cities.

Combine trips rather than making a bunch of little trips for supplies and groceries

If you pick up groceries while in town for work rather than making special trips or simply plan out your meals and household so that you make fewer trips, the time and fuel savings will start to add up quickly.

They type of tires you have on a truck can make a difference in how many miles per gallon you get.

If fuel issues are long term or you want to increase gas mileage and you drive a truck, you may want to consider the type of tires you have. While it may not be worth it to change right now if you have a decent amount of tread left, the next time you decide what to get, ask what tire will give you the best mileage.

There is a good chance that road tires will give you the best mileage but they are not always suitable. An all-season tire will result in better gas mileage than a mud and snow tire. I am not a tire expert. The point is to get the most fuel-efficient tires that suit the needs of your lifestyle. Here is a good blog post on tires and fuel efficiency.

Check your tire pressure.

The U.S. Environmental Protection Agency states that under-inflated tires potentially reduce fuel economy by about .2% for every 1 psi below the recommended air pressure.  Keeping your tires properly inflated is important for your safety too.

How much are you hauling?

The more weight in your vehicle the worse the gas mileage. At the same time, you are going to be better off making one trip while hauling a heavier load than two trips with a lighter load. I am not advising exceeding the recommended weight limits of your vehicle but you might want to consider the best way to get the most out of each gallon of gas vs the weight you need to haul around to do your job and run your household.

Don’t drive around everywhere looking for gas if supplies seem to be low.

It is amazing how much gas gets burned by people looking for gas. If you drive around for 30 minutes or an hour looking for fuel you probably would have been better off staying home and conserving what fuel you had rather than going towards potential trouble and even less fuel than when you started.

Practice staying in place when possible

A lot of folks are preparing for a potentially long emergency or SHTF situation but I sometimes question if they realize how localized their life will have to become if that happens. Some people are far more social than others and human beings, in general, need some interaction to keep their head straight. At the same time so many families are not used to being forced to spend time with those they live with or if single they are not used to staying away from their group of friends.

Being alone together for even a few days is not something some couples or married people do very often if ever. If it costs a lot to hit the road or go out and socialize, perhaps it is a good time to practice how it would be if you didn’t have the outside world at your fingertips. Take notes on the experience and then do what you can to make it easier on yourself and those you love during a long emergency.

Consider ordering more items so you can make less trips or take advantage of putting orders in online for groceries and household goods and picking up weekly

It often takes longer for the price of online goods and shipping to feel the impact of increased fuel prices. Larger companies like Amazon and Wal-Mart certainly do not want to lose business by jacking up prices too much.

Also, consider how much fuel you will burn by shopping at brick and mortar. If you live out in the country the cost of commuting to pick up items may be very significant. I don’t know about you but I can usually wait two days for most things to be delivered so big retailers like Amazon, Wal-Mart, Target, etc, work for me.

For fresh items and some other goods, you can just put an order in online and then pick up your groceries at the scheduled time. That means no actually having to go through the store and shop. Wal-Mart offers this but I am sure that plenty of other grocery stores are starting to offer this service as well.

For some people, setting down in front of their computer and putting and order in actually helps them not make impulse purchases and it keeps a record of what you are buying so you can do a simple reorder.

Looking over your order well in the comfort of your home can also reduce the risk that you forget something and need to go back. Those that have children might also appreciate not having to force kids to go with them on lengthy shopping trips.

There is a big difference between simply driving to a store for a pick-up and taking a few kids on an hour-long jaunt through the store.

If you have to go back and forth to a job, just picking up can also save some time because you are not walking all over a store.

Pay attention to what is going on in the world.

I don’t blame someone for not wanting to read the news all the time and dwell on it but at the same time, it is a good idea to at least have a grasp of the major events so you can make good choices for yourself and your family. My hope in writing this article is that it will help you consider what to do if things escalate.

A lot of these ideas will help you save time and money even if things calm down. It is much easier to get ready in advance than deal with huge lines at gas stations or pay more money for the things we need daily. Temporary price increases and crazy markets are examples where using some preps could help you get through to better times without taking such a big financial hit or going without things you like to have.

Higher Fuel Costs=Higher Cost For Everything (Eventually)

While it may take some time for prices to rise, a significant disruption in the world’s oil supply likely means higher costs for everything. Goods and services that take the most fuel to produce and ship will see the rise first.

All of a sudden, shipping a mattress ordered off Amazon may cost double. It really depends on how high gas and diesel go. With so much turmoil in the trucking industry and significant layoffs, getting things from Point A to Point B may be even more troublesome and complicated.

I am like you in that all I can do is try to gather what info I can and plan accordingly. Hopefully, things calm down. If not, we might all have to finally use some of those preps.

Personally, I am fearful that the events of the past few days are leading us into another war sooner rather than later. It seems that is what some people want. Thoughts?

Best wishes,
Sam

 

 

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7 Responses to “Preparing For the Costs of A Potential Energy Crisis”

  1. Resist the urge to trade in your truck or gas guzzling car if fuel prices climb. When I was in the car business, it always amazed me how many people made ‘bad’ deals to get a fuel efficient car that they probably will not enjoy driving. I would see the prices charged for hy-brids or pure electric vehicles jump when a gas crisis began and trade allowances for trucks, SUVs, and the like drop. Add those two and you have a bad deal.

    The low gas prices have made the EVs hard to sell in many markets, so that is when to get one at a good price. Look at the car lots to see how many truck based models are offered vs fuel misers.

    Personally, I would find a small subcompact with a small engine and skinny tires used that you can buy as cheaply as possible for cash. Even if it needed work, it will be your back up car that gets great fuel economy and will allow you to ride out the fuel shortage. They always end, I’ve seen them all. People tend to go back to the big cars after a crisis, but why? It seems silly to commute alone in a 2 ton truck, and saving gas frees up the budget. Car payments are another dumb thing but that is another post.

    Reply
    • People like big automobiles because they’re comfortable and enjoyable to drive. The bigger the vehicle the better chance the other automobile becomes the crumple zone.

      No one buys a Fiat 500, Smart Fortwo, or any other small and bland cars because they like them or have excellent utility.

      I like it when people buy those cars though. Means it offsets the CAFE fleet requirements for what I like to drive. It also means more gas for me.

  2. While I am not a doomsayer, it is important to be vigilant in what we take for granted in this country. Food, water and transportation are the top items for survival. President FDR said it best: “You have nothing to fear but fear itself” So I say keep alert, pay attention to what is going on and by all means be ready if someone or something just pulls the plug and leaves us stranded.

    Reply
  3. I suppose this would be a good time to stock up on kerosene, Coleman fuel, treated gasoline, bottled water, and and and mixed vegetables.
    From the ONLY lantern collector in Raymond Mississippi

    Reply
  4. I did live through the oil embargo of the 70s. None of the fears of shortages due to inability to ship products to market were actually a problem. The biggest problem was the hated 55 speed limit. The national savings of gas was minimal because the lower speed limit was widely ignored. Today in some ways we are better off, since we produce almost all our own oil. But we are in a worse place, since so many products come from outside the US. Now is a good time to discover merchants that sell products produced locally. Recently bought 25 pound bags of split peas, lentils, and beans. All were less expensive than Walmart and were grown less 100 miles from my home. The store owner did not pass on shipping charges.

    Reply
  5. While I agree this is a topic of concern, I do not think it is ‘panic time’. I agree with Samantha that it is a good time to reconsider our ‘habits’. I only drive a mile a day back and forth to work, DH has a much longer commute. We both take advantage of the fuel discounts we earn at the local gas stations. We also store gas for our generator, and rotate that out on a regular basis. As I work at the local grocery chain, I have gotten used to picking up items a few at a time, after work. All the while, wondering about the folks I see in the store on a daily basis, wondering if they have anything at all put back. I’d say at least half of them dont. For some, particulary the elderly, it might be a social thing. It may also well be that they don’t want things to ‘go bad’ before they can use them. I get that. I do that myself. DH takes sandwiches for lunch, so I only buy enough of that for the week, so I am not throwing food out. But I have and keep stocked up on ‘basics’ enough that I can feed the two of us for a bit of time. That’s the end of my commentary on grocery shopping. Yes, you will see the shelves more bare if gas prices continue to rise.
    But as far as fuel goes, take advantage of the ‘points’ savings with your local gas stations. Keep a gas can or two in reserve (with stabilizer) and rotate them out regularly. Use those apps that help you find the best gas prices, if that is feasible.
    And don’t forget to store the oil you need to run your ‘other’ machines like the chainsaw, weedeater, etc. so you can make the right blend of fuel. Those may well go up in price as well.

    Reply
  6. They already said it would be back to full production and fixed by the end of the month.
    That being said continue to prepare as we always do because things do happen.

    Reply

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