The 3F Crisis: Food, Fuel, & Finance

The 3F Crisis: Food, Fuel, & Finance :

Yes, I know that the "3Fs" is part of the punch line of an old joke with some excellent advice (that I have managed to violate in every way!).

But, 3Fs also describes the crisis in fuel, food, and finance.

The "3F" Crisis is a useful shorthand. I would like to take a view of the impact on individuals in the US with some support from anecdotes.

Here in South Florida, our stone crab season runs until May 15. But, many stone crab fishermen have stopped pulling traps. It's not because of a lack of crabs or because of high fuel costs... it's a lack of buyers. Usually, the supply/demand curve is tilted the other way. Usually, in Miami, people are waiting in line to GET stone crabs in the limited season. Not now. Demand for this premium non-essential product is soft.

Disney reported better attendance at theme parks than last year. "We're definitely benefiting from the dollar exchange rate" Iger said.... and added there wasn't yet any evidence that higher gasoline prices had hit attendance at the parks."

I have a link to a FL Dept of Health article saying that ~20.9 % of adults smoke US-wide and 17.4% smoke in Florida. (2006 numbers) More recent figures (no link) are higher in Florida. It's easy to find statments and statistics (see tobaccofreekids.org for example) showing that higher cigarette costs reduce cigarette use. Yet, the high percentage of tobacco use among adults continues despite the years of "education" on smoking, the very high out-of-pocket cost of tobacco, and the recent general loss of disposable income.

The US Military, led by the Air Force, is trying to go to coal-to-liquid fuel plants in places where they make sense.. such as Montana. The area south of Malmstrom AFB is rich in coal that is easy to mine. The USAF has been trying to build a coal-to-liquid plant there for years. "Concerned Citizens" complain about the use of water and the creation of CO2. While trying to move away from carbon-based fuels is laudable, why not use our abundant sources of carbon (e.g. coal) to meet necessary demands like the military?

These anecdotes and others say to me that the "3F" crisis will have the consequence of pulling all of us away from the fringes. The fringes of spending, consumption, and dogmatic causes. Those who make a living on the fringes will suffer the most.

This is no great news. It is Maslow's Hierarchy of Needs applied to economic life. Most people will quietly pull back to the core needs.

--Local non-essential businesses (e.g. local restaurants) powered by US dollars will suffer most.
-- Anything that can be powered by Euros or other non-dollar-pegged currencies (like Disney) will do well.
-- WallMart is in for a sales boom in the basics.
-- There will be an "alternative energy" bubble, burst, and glide.
-- Carbon-based fuels are here to stay for a long time. The battle between the oil industry, which wants to keep its oil assets priced high, and the coal industry will take place in Congress and it will be awful to watch. Oil will join with its unlikely friends, "concerned citizens", to try to keep the coal buried.
-- Common sense (i.e. consensus) may become more common as we pull back from the edges. - Political fallout will further reduce the faith in Congress and the presidency.

There is a 50/50 chance that the political result ("consequences") will be benign or catastrophic for the current form of government. This is an important time.

One possible out ... IF the technology of sun-to-electricity really does benefit from Moore's Law (see previous post) then... it could be happy days are here again!

Links:
http://money.cnn.com/news/newsfeeds/articles/djf500/200805061812DOWJONESDJO...
http://www.doh.state.fl.us/tobacco/PDF_Files/2006_FLATS_Cigarette_Use.pdf
http://www.meic.org/energy/coals-to-liquid-fuels/malmstrom-c2l-background