by Kerry Lutz
Financial Survival Network
1. Oil It’s no secret that Oil is going much higher due to misguided policies around the world that are aimed at discouraging oil production, while at the same time encouraging economic growth and thereby consumption. You don’t have to Milton Friedman to figure out that growing economies require more energy and therefore more petroleum (and natural gas). Governments can make nice gestures towards sustainable energy, but for the foreseeable future the majority of energy demands will be fulfilled by oil and fossil fuels. Therefore, there will be a triple-whammy effect, higher energy demand, reduced energy production and reduced fiat currency purchasing power. Record oil prices are in the offing.
2. Gasoline We all know that there’s a glorious electric future that awaits us, if only your Tesla could get 500 miles per charge, everything would change for the better. In the meantime, there are 1.4 billion cars and light trucks around the globe. Current new car production is approximately 80 million units, of which a very small percentage are electric vehicles. If ICE car production was converted over to EV’s tomorrow, assuming enough batteries and rare earth metals could be produced, there would be a 16-year replacement timeframe. However, it’s far closer to 25 years, as the conversion cycle is just getting started. Proponents claim that we’ll all be doing autonomous ride sharing, and perhaps they’re correct. However, this would turn cars into taxi-like experiences. Which means you’ll be subject to all different types of noxious substances and smells such as those encountered when riding a New York City Taxicab. There’s a large portion of the population that would like to avoid such sensory perceptions. Therefore, expect gasoline prices to escalate as the production cycle shifts to EV’s. In addition, governments are doing everything in their power to hinder petroleum production, all in the face of global rising demand. This will not work out well.
3. Fertilizer Whether you love industrial farming or hate it, rising petroleum prices and decreasing supply will lead to much higher fertilizer and pesticide prices. For the past decade, low natural gas prices helped keep these prices in check, but we all know what’s happening in the US, Europe and Asia. Which spells the end of lower natgas prices (Henry Hub hit $6.29 as several days ago and have pulled back somewhat, but they could well be headed over $10).
4. Tires According to industry sources, “It takes \approximately seven gallons of oil to produce a single tire. Five gallons are used as feedstock (from which the substances that combine to form synthetic rubber are derived), while two gallons supply the energy necessary for the manufacturing process.” In the last decade tires rose dramatically in price, the result of higher energy prices and emerging market demand. The same thing is being repeated yet again. And yes, EV’s still require rubber tires. So, the price of tires is already high and going higher.
5. Water Energy is about 50% of the produced water cost. In addition, shortages of clean potable water are beginning to appear around the globe. (There’s always been a shortage in 3rd World Countries) Desalinization of ocean/sea water is the obvious answer. However, this process uses even more energy than conventional water treatment. Therefore, the price of water will go higher still.
6. Car Insurance Prices are headed higher. In good times or bad, you know that your car insurance bill increases every year, no matter how safe a driver you may be. A major component of car insurance is the cost of vehicle replacement parts. Due to global supply chain issues, this market has been seriously impaired. As a result, prices have soared. Compounding this situation is increased sales of electric vehicles. Due to a shortage of parts and skilled EV techs, they are the most expensive vehicles to fix. These factors have led auto insurers to total out cars that in normal times would have easily and inexpensively been repaired. Auto insurance rates have nowhere to go but up at much higher rates
7. Pharmaceutical Drugs Pharma manufacturers use petrochemicals as a feedstock to manufacture drugs. For reasons stated above, these feedstocks are going higher leading to higher drug prices, especially for generics. Global supply chain shortages and the international health issue are making certain drugs harder to find, which is also leading to higher prices.
So again, we must ask, are you prepared for the next great inflationary cycle that is already upon us? If not now, when? Go to www.FinancialSurvivalNetwork.com to help you figure it out. Now more than ever.
Regards,
Kerry Lutz
Are you the son of Carlton Lutz by any chance ??