Upward Bound

Gasoline prices in the United States have been breaking into new inflation-unadjusted territory lately. I pulled some data from the United States’ Energy Information Administration (EIA) that suggests a not so comfortable summer this year. Lets take a quick look at one of EIA’s graphs:

http://eia.doe.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=EMM_EPM0U_PTE_NUS_DPG&f=W

If we peer into the actual numerical data, we can observe that average all-conventional U.S. retail gasoline prices over the fourth week of April 2011 (ending April 25) had a mean price of $3.867.

Since the value of the dollar right now is close to what the value of the dollar was during the depths of the liquidity crisis in 2008, I would argue that this is a valid enough reason to compare U.S. gasoline price trends today to price trends in the first half of 2008. The value of the dollar in international currency markets seems to negatively correlate enough with gasoline prices to be used as a complementary metric of the other (I’m too lazy to do the statistics for that right now).

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=dxy&insttype=&freq=2&show=&time=11&x=0&y=0

The U.S. Dollar Index tracks a basket of international currencies against the U.S. dollar. Since quite a bit of oil is exchanged for dollars in commodities markets, it might be useful to also note that the value of the dollar right now is only 1.3% more than the value of the dollar during April of 2008, only marginally worth more since the recession.  Initially, I was led to think that gas prices were perceived by Americans to be high simply because the dollar was weaker which would mean that it would cost more in dollars to purchase a barrel  of oil that would drive up the input costs to produce a gallon of gasoline. But gasoline prices year-over-year from April 2008 to April 2011 have gone up by 6.97%–far outpacing the 1.3% rise in the dollar’s worth (which currently has a downward trajectory) as well as outpacing the 2.5% inflation rate from 2008 to 2011.

Although building forecasting models from somewhat causal relationships between currencies and goods is more complex than this, we’ve at least ruled out the “weak dollar hypothesis.” If we run with the assumption that the U.S. Dollar Futures Index and gasoline prices are negatively correlated anyways, we might get a tiny sense of where gasoline prices in the United States could potentially head in a worst-case, recession style situation:

The circled table cell shows that we paid during the fourth week of April 2008 an average price of $3.615. Notice also the HUGE plummet in prices to $1.685 in December 2008. I suspect that this was due to the U.S. Federal Reserve’s 1st round of quantitative easing maneuvers (QE1) that began in November 2008.

If we look at the rate of change in month-over-month retail gasoline prices of the fourth week of each month from January-July 2008, prices went up 5.38% on average for each month in that series. If we assume the same average rate of  change in month-over-month prices of the fourth week of January until the expected mid-July peak in 2011, we can potentially see gasoline prices hitting a weekly average of $4.294 this summer and then retreating afterwards. But of course there are other factors that could contribute to how prices accelerate or decelerate from now until the end of summer. The Middle East and North Africa is going to be on everyone’s minds (even though there is no reason it should, but that’s an entirely separate conversation) as well as hurricane season in the Gulf Coast.

An Energy Crisis of the Third-World Kind

There has been an international media fanfare circling the nuclear disaster at the Fukushima Daiichi plant in Japan over the last month since the Tohoku earthquake and tsunami, but not all energy disaster coverage is created equal. Perhaps an equal amount of attention has been given to Libya and its oil. But I fear that there are other more neglected disasters which continue to get the silent treatment from the international community.

When Americans or the Western world think of the country of Somalia, what is evoked in their minds? …warlords, famine, piracy, Black Hawk Down? What about nuclear toxic waste?

I first heard about the dumping of toxic and radioactive wastes by European companies off the shores of Somalia from musician K’naan (internationally famous for writing the 2010 World Cup Anthem, “Wavin’ Flag”) as a precursor to the piracy movement in his country, but I merely brushed it aside as a rumor. However, recently, I found a post from a Minnesotan blogger who confirms K’naan’s claims via multiple official independent sources.

Some folks say that silence in the face of violence is often worse than the original crime itself. But some crimes don’t even scratch the surface of the mounting unspoken injustices of the world. As is historically the case, these environmental crimes seem to always implicate the international scramble–heinous or not–for the world’s energy and resources.

The Hubris of Empire

So it seems that once again, brilliant network and computer engineers have found a back door into some of the largest multinational corporations:

“The names and e-mails of customers of Citigroup Inc and other large U.S. companies, as well as College Board students, were exposed in a massive and growing data breach after a computer hacker penetrated online marketer Epsilon.”
http://www.reuters.com/article/2011/04/04/us-citi-capitalone-data-idUSTRE7321PI20110404

Internet security has always maintained an elusive veil of protection. As much as we would like to think that the mapping of our digital selves onto cyberspace remains within our full control (especially with the advent of social networking services such as Facebook, Twitter, LinkedIn), I predict that such breaches of internet security will continue to be on the rise. [1]

With respect to energy security, the most recent string of network hack-ins at major financial and energy corporations over the last couple of months [2][3] present an interesting problem to the wave of so-called “smart grid” initiatives that intend to provide more automation of our electric power systems. The current VPNs and telemetry systems that facilitate automatic generation control (AGC) to keep the United States’ electricity grid secure have historically been remarkably reliable; however, the additional layers of telecommunications infrastructure being proposed for the grid will present more opportunity for similar breaches we’ve seen at financial and oil firms. One can envision distributed denial of service (DDoS) attacks orchestrated by a nation state with enough wherewithal on the future smart grid (several hackers at major banks have been traced to China DNS and IP addresses) by shutting down commercial systems to gain economic advantages.

Only time will dictate the fate of nations.

See also
[1] U.S. Computer Emergency Readiness Team. http://www.us-cert.gov/reading_room/index.html
[2] “Chinese hackers targeted Morgan Stanley in 2009.” http://www.guardian.co.uk/technology/2011/mar/01/morgan-stanley-chinese-hackers (1 Mar 2011).
[3] “Data theft attacks besiege oil industry.” http://news.cnet.com/8301-30685_3-20031291-264.html?part=rss&tag=feed&subj=News-Security (2 Feb 2011),