Link to article here.

It’s obvious to everyone but road builders and politicians that $4 a gallon for gas is the breaking point for Americans. There is no more money in the family budget for transportation, and it’s causing major lifestyle changes and the emptying of one’s savings account just to fill the gas tank today.

There just aren’t enough motorists with the discretionary income to make toll roads financially viable any longer. The massive amounts of leveraged debt to erect these toll projects is a house of cards the size of the mortgage crisis or BIGGER. We all know who bailed that out, we, the taxpayers, did. Time to head this crisis off at the pass and defeat this push for toll roads NOW!

America’s love affair fades as the car becomes burden of suburbia
By Paul Harris
The Observer (UK)
Sunday, July 6, 2008

The nation of road movies, freeway freedom and dreams of endless horizons is waking up to the reality of soaring fuel prices. Paul Harris in Riverside, California, reports that people are leaving their gas guzzlers in the garageIt is known as the Inland Empire: a vast stretch of land tucked in the high desert valleys east of Los Angeles. Once home to fruit trees and Indians, it is now a concrete sprawl of jammed freeways, endless suburbs and shopping malls.

But here, in the heartland of the four-wheel drive, a revolution is under way. What was once unthinkable is becoming a shocking reality: America’s all-consuming love affair with the car is fading.

Surging petrol prices have worked where environmental arguments have failed. Many Americans have long been told to cut back on car use. Now, facing $4-a-gallon fuel, they have no choice.

Take Adam Garcia, a security guard who works near the railway station in Riverside. Like many Inland Empire residents, he commutes a huge distance: 100 miles a day. He used to think nothing of it. But now, faced with petrol costs that have tripled, he is taking action. He has even altered the engine of his car to boost its mileage. ‘I have to. Everyone does. I can’t afford to drive as much as I did,’ he said.

Recent figures showed the steepest monthly drop in miles driven by Americans since 1942. At the same time car sales are collapsing, led by huge SUVs.

General Motors, once the very image of American industrial might, is in deep trouble. Cities are now investing in mass transit, hoping to tempt people back into town centres from far-flung commuter belts where they are now stranded by high petrol prices.

Jonathan Baty used to be a pioneer. The lighting designer has cycled to work every day since 1993. It’s a nine-mile round trip through the heartland of a car-based culture once famously termed ‘Autopia’. But now Baty has company on his daily rides as others choose two wheels rather than four to navigate southern California’s streets. ‘We have seen a whole emergence of a bike culture in this area. There is a crescendo of interest,’ said Baty, who does volunteer work for a cycling group, Bicycle Commuter Coalition of the Inland Empire.

In Riverside, bus travel is up 12 per cent on a year ago, rising to 40 per cent on commuter routes. Use of the town’s railway link is up eight per cent. A local car pooling system is up 40 per cent. It is the same in the rest of the US. In South Florida a light rail system has reported a 28 per cent jump in passengers. In Philadelphia one has shown an 11 per cent rise. Even nationwide scooter sales have shot up. At the same time car sales are hitting 15-year record lows. Last week major American car-makers reported a devastating 18 per cent drop in car sales.

The numbers point to a more fundamental shift. In America car sales carry a symbolic value that transcends the wheeler-dealering of the showroom. This is a nation of fabled road trips and Route 66. ‘There is an American dream of mobility and freedom and wealth. The car is part of all that,’ said Professor Michael Dear, an urban studies expert at the University of Southern California.

In the 1950s the confident nation that helped win the Second World War was expressed in classic car designs of huge fins and open tops. By the 1990s it had become the Hummer, a huge bulking car born from the military. Now there is to be another shift. For, hidden within the car sales figures, is a more complex story than a simple fall. Sales of big cars are plummeting while smaller vehicles, especially fuel-efficient hybrids, are replacing them.

GM has now closed SUV production at four plants. Its Hummer brand is up for sale, or might even be closed. GM is ploughing huge resources into its 2010 launch of the Chevy Volt, a hybrid car that may get up to 150 miles a gallon. It needs to. GM’s share price recently hit a 54-year low, prompting one top investment bank to warn that the firm could go bankrupt.

The Volt, and cars like it, could become symbols of a new more conservation-minded car age. As Americans enjoyed the 4 July holiday weekend, increasing numbers of them were staying at home rather than hitting the road. Newspapers were full of tips for ‘stay-cations’, not weekend breaks away. Customs once scorned, such as car pooling and cutting out trips to the mall, are now commonplace. The fact is, the vast majority of Americans cannot give up their cars altogether. Too many cities lack any reliable public transport.

Adam Garcia is one of those caught. He does two jobs and his daily road trip by car is a necessity. ‘We don’t have much of a choice. I have to drive,’ he said. Sacrifices come elsewhere, in giving up trips to the cinema and to see friends.

But America’s changing relationship with the car is just part of the story of how the most powerful nation is changing in the face of the oil price rise. America has been built on an oil-based economy, from its office workers in the suburbs to its farmers in the fields.

Since the 1950s and the building of the pioneering car-orientated suburb of Levittown in Long Island, the American city has been designed for the convenience of the car as much as its human inhabitants. People live miles away from jobs, shops or entertainment. If you take away cars, the entire suburban way of life collapses. To some, that development is long overdue.

‘Suburbia has been unsustainable since its creation,’ said Chris Fauchere, a Denver-based film-maker who is producing a new documentary on the issue called The Great Squeeze. ‘It was created around cheap oil. People thought it would flow easily from the earth forever.’

Fauchere’s film, due out later this year, aims to tackle the profound changes caused by a world where oil is becoming scarcer. He does not think that it is going to be easy for America to make the adjustment. ‘It is going to be tough. It is like a chain reaction through the economy. But if you look at history, it is only crisis that starts change,’ he said.

The suburbs are already being hit. As cars become more expensive, the justification for suburbs seems to disappear. Some commentators have even suggested that suburbs – once the archetype of an ideal American life – will become the new slums.

In the face of expensive fuel and crashing property prices, the one-time embodiment of a certain American dream will become crime-ridden, dotted by empty lots and home to the poor and unemployed. That is already happening as crime and gang violence has risen in many suburban areas and tens of thousands of homes have been reposessed because of the mortgage crisis.

In effect, suburbs will become the new inner cities, even as once-abandoned American downtowns are undergoing a remarkable renaissance. Even malls, the ultimate symbol of American life since the war, are undergoing a crisis as consumers start to stay away.

But there are even deeper changes going on. The car, the freeway system and cheap air travel made America smaller. Everywhere was easily accessible. That, too, is ending. Higher fuel prices have dealt a terrible blow to America’s airlines. They are slashing flights, raising costs and abandoning routes. Some small cities are now losing their air connections.

In effect, America is becoming larger again. That will lead to a more localised economy. To many environmentalists that is a blessing, not a curse. They point out that cheap fuel for industrial transport has meant the average packaged salad has travelled 1,500 miles before it gets to a supermarket shelf.

‘Distance is now an enemy,’ said Professor Bill McKibben, author of the 1989 climate-change classic The End of Nature. ‘There’s no question that the days of thoughtless driving are done.’

The worst hit parts of the US are not yet the suburbs or the freeways of southern California, but the small towns that dot the Great Plains, Appalachia and the rural Deep South. Even more than the Inland Empire, people in these isolated and poor areas are reliant on cheap petrol and much less able to afford the new prices at the pump. Stories abound of agricultural workers unable to afford to get to the fields and of rural businesses going bust.

Even farmers are not immune. They might not need a car to get to their fields but their fertilisers use oil-based products whose prices have gone through the roof. A handful have started using horses again for some tasks, saving petrol on farm vehicles.

The American dream of the last half century is thus changing. The car and its culture is now under a pressure unimaginable even a few years ago. ‘The frontier of endless mobility that we’ve known our entire lives is closing,’ said McKibben.

America’s excess has had many imitators. Recently a delegation of Chinese government officials and architects visited an Arizona suburb near Phoenix. Approving notes were taken as they surveyed the luxurious car-driven suburban lifestyle on display. This was just one of the many delegations that regularly come from the Far East or South America.

Even as America is sobering up from its excess of cheap oil, other parts of the world are seeking to join the party. They, too, want homes far from dirty city centres, huge open roads and fast cars. It is still a beguiling vision of freedom, mobility and bountiful riches.

McKibben spent last week on a visit to Beijing. He was worried about what he saw. Even as America’s obsession with the car lifestyle is ending, others are embracing it. ‘The Chinese have spent the Bush years starting to build their own version of America. A key question for the planet is whether they still have time to build a version of Europe instead – global warming will probably hinge on the answer to that question,’ he said.

Link to article here.

Oil’s Rapid Rise Stirs Talk of $200 a Barrel This Year
Long List of Factors Keeps Prices High; Releasing Reserves?
By NEIL KING JR.
Wall Street Journal
July 7, 2008; Page A6

Oil’s historic ascent from $100 to nearly $150 a barrel in just six months is lending weight to a far grimmer prediction: Crude could reach $200 a barrel by the end of the year.

Oil at that price would wreak deeper havoc on the world’s airlines and automobile industries.

In the U.S., $200 crude would push the price of gasoline to well over $6 a gallon, causing commuters to alter their driving habits more sharply than they have already, while putting extreme strains on large sectors of the U.S. economy. In Europe, it would stir more political unrest and increase the clamor to cut the continent’s stiff petrol taxes. In Asia, governments would be under pressure to cut fuel subsidies and risk a popular backlash.

U.S. benchmark crude prices leapt 3.6% last week, closing before the Independence Day holiday at a record $145.29 a barrel. Roughly halfway through the year, oil prices have soared 50% since Jan. 1 and have doubled since the same time last year. (See related article.)

Few oil watchers are now ready to bet that oil will hit $200 a barrel by New Year’s Eve. But nearly all are wary of predicting how and when oil’s upward stampede will be reversed.

What makes the market so unpredictable, analysts say, is that prices are being pushed by such a wide array of factors, while no single force has emerged with the power to throw them in reverse.

“Crude is going up,” said Dave Pursell, an oil analyst at Tudor Pickering in Houston, “because there is nothing strong enough yet to push it down.”

In Washington, deepening fears that oil prices will shoot still higher have stoked talk in Congress and within the Bush administration of using one of the last remaining cudgels to try to reverse the price rise: a sharp and sustained release of oil from the U.S. Strategic Petroleum Reserve.

Those discussions remain preliminary, though, while most senior administration officials remain opposed to such a move, because the oil stored in salt mines is meant for release in genuine supply emergencies.

The list of forces shoving prices upward is long: a weak dollar driving hot money into commodities; jitters over a possible military conflict with Iran; soaring costs and chronic project delays in the world’s oil patch; concerns over scarce supplies and long-term production declines; and continued robust demand growth in much of the developing world.

Oil ministers and top petroleum executives have added to the alarm. Paolo Scaroni, head of Italy’s biggest oil-and-gas company, Eni SpA, told an Italian newspaper last week that he could see prices hitting $200 a barrel this year.Chakib Khelil, president of the Organization of Petroleum Exporting Countries, predicts that crude could go as high as $170 a barrel this summer.

Oil’s seemingly unstoppable rise has also scared off some of the very financial players that would otherwise temper the market. Oil producers who would normally lock in high prices by hedging on the futures market have now backed off, assuming that prices will continue to rise.

That has fueled the upward momentum as financial players continue to bid up oil on the futures market, said Larry Goldstein, an economist at the Energy Policy Research Foundation. “The problem is that the natural hedgers, the producers themselves, are shying away, while the buyers get bolder,” Mr. Goldstein said.

Geopolitics, particularly the fear of a potential Israeli or U.S. attack against Iran, have also re-emerged as a significant factor in the market. Some investment houses were saying last week that it was more likely than not that a war with Iran would break out this fall.

With so many forces arguing for higher prices, the big question is: What would spook the market enough to cause prices to fall?

So far, falling gasoline use in the U.S. has done nothing to put a damper on prices, largely because growing demand elsewhere in the world has managed to keep global supplies tight.

“The reality of it is, swings in U.S. consumption just don’t matter that much anymore,” said Jeffrey Rubin, chief economist at CIBC World Markets, who is predicting that oil will average $200 a barrel in 2010.

The one shift in demand that would have a serious price impact would be any sign of diminished thirst for fuel in China. Speculation has run high for months that Chinese demand may have surged artificially in advance of the Beijing Olympics as the country turned to oil over coal for power generation to ease pollution. It is also unclear whether China stockpiled gasoline and diesel to avoid any shortages.

“But if consumption roars on even after the Olympics, then the upside pressure on prices will remain pretty strong,” said Stephen Brown, an energy economist at the Federal Reserve Bank of Dallas.

Another force that could shove prices down in a hurry would be signs of a significant buildup in oil inventories in the U.S. But even with oil use down in the U.S., crude stockpiles remain unusually low. The U.S. now has just over 19 days of total commercial supplies, compared with 23 days worth at the same time last year.

Alarmed over the economic impact of soaring oil prices, Saudi Arabia tried last month to hammer the market back down by boosting its monthly output and promising a dramatic long-range increase in its production capacity. But neither announcement by the world’s largest oil producer had any perceptible affect, further underscoring how weak the market’s traditional levers now are.

Some advocates are clamoring for the Bush administration to take a more dramatic step and release millions of barrels from the U.S. strategic reserves, which contain around 706 million barrels. The House of Representatives is weighing legislation to force a release from the reserves, while support for such a move also appears to be building in the Senate.

The administration strongly opposes using the reserve for market interventions.

A release of two million barrels a day for long as a month, analysts say, could make a sharp impact on prices, in part because the barrels would be sold at auction, thus allowing buyers to set the oil’s value. The U.S. consumes a little more than 20 million barrels a day.

“We have exhausted all other short-term policy options,” said Mr. Goldstein, a veteran of the Washington energy establishment who is among those pushing aggressively for a significant release from the reserves. He argues that the U.S. Energy Department should step in to tamp down oil prices and thus prevent further damage to the U.S. economy.

But others worry that even that step could backfire. For one, sky-high prices have made refiners all the more reluctant to build up oil stocks.

“And even if you release 20 or 30 million barrels, people are still going to be worried about Iran or something else,” said Michael Lynch, a Massachusetts-based oil analyst who is among the many who believe that oil prices are already far too high.

Link to article here.

Employers cut jobs for 6th straight month
By JEANNINE AVERSA
Associated Press
7/3/2008

Employers cut payrolls by 62,000 in June, the sixth straight month of nationwide job losses, underscoring the economy’s fragile state. The unemployment rate held steady at 5.5 percent.

The latest snapshot of business conditions, released by the Labor Department on Thursday, showed continued caution on the part of employers who are chafing under high energy prices and are uncertain about how long the economy will be stuck in a sluggish mode, reflecting fallout from housing, credit and financial troubles.

Heavy job losses in construction, manufacturing and financial services, along with cuttbacks in retailing, eclipsed job gains in education and health services, leisure and hospitality, and government.

The report, however, weak, was largely on target with economists’ forecasts. They had been expecting employers to reduce payrolls by around 60,000 jobs in June and for the unemployment rate to slip a notch to 5.4 percent.

The jobless rate spiked to 5.5 percent in May. That marked the biggest over-the-month increase in two decades and left the rate at its highest since October 2004.

Job losses in both April and May turned out to be considerably deeper than had been thought. Payrolls dropped by 67,000 in April, versus the 28,000 previously reported. And, losses in May came to 62,000, rather than the 49,000 initially estimated.

So far this year, the economy has lost a total of 438,00 jobs, an average of 73,000 a month.

The economy is the top concern of voters. The faltering labor market is a source of anxiety not only for those looking for work but also for those worried about keeping their jobs during uncertain economic times. It also can spell more trouble for an already shaky economy if people and businesses were to hunker down further.

Private analysts predict the economy will continue to shed jobs in the months ahead, pushing the unemployment rate higher.

“The economy is at risk of a hard landing,” said Brian Bethune, economist at Global Insight.

The number of unemployed people in June was 8.5 million, up from 7 million a year ago.

In a separate report from the department, the number of newly laid off people signing up for unemployment insurance rose sharply last week. New applications jumped by 16,000 to 404,000, the highest level since late March. The increase was bigger than economists were expecting; they were forecasting claims to rise to around 385,000.

With inflation concerns growing, the Federal Reserve last week ended an aggressive rate-cutting campaign, started last September to shore up economic growth.

Fed Chairman Ben Bernanke and his colleagues are caught between risky crosscurrents of plodding economic growth and spiraling energy and food prices that threaten to spread inflation. Lowering rates further would worsen inflation. But boosting rates too soon to fend off inflation could hurt the fragile economy.

Oil prices on Wednesday hit a new record above $144 a barrel, while gasoline prices reached a new nationwide high of $4.092 a gallon on average, according to AAA, the Oil Price Information Service and Wright Express.

Workers with jobs saw modest wage gains in June

Average hourly earnings rose to $18.01 in June, a 0.3 percent rise from May. That matched economists’ forecasts. Over the past year, wages have grown 3.4 percent, the smallest annual increase since January 2006. Paychecks, though, aren’t stretching as far because of high food and energy prices.

In its latest economic assessment last week, the Fed observed that “labor markets have softened further.”

However, the Fed believed that its powerful series of rate reductions along with the government’s $168 billion stimulus package, including tax rebates, will help lift economic growth over time.

Some economists fear that when the bracing force of the rebates fades, the economy could be in for another rough patch. Those analysts worry that the economy _ which has been coping with sluggish growth at best _ will have a “relapse” and lose momentum near the end of this year.

There’s been a lot of talk about whether the economy is on the brink of, or has fallen into, its first recession since 2001. The official determination, made by a panel of academics, usually comes well after the fact.

Economists expect the unemployment rate to hit 6 percent or higher early next year, even if the economy were to show better growth. Companies will be reluctant to ramp up hiring until they feel certain the economy will stay on firmer footing.