Long-time readers of this blog may remember that I wrote a longish post in December 2006 looking at what 2007 might be holding in store for us. I thought it would be interesting to see how things have stacked up compared to what I was thinking a year ago.
It was a relatively quiet year in the oil world… there were several major hurricanes that swept into the Carribean, but they only did glancing damage to the oil field. No major wars in the Middle East beyond the lingering Iraq occupation, no major terrorist strikes, etc. Yet oil prices still managed to rise from ~$60/barrel to close to $100/barrel this year, and as 2007 draws to a close oil prices still bouncing around in the mid $90’s in what is supposed to be one of the slower periods for gas consumption.
The good weather kept gas prices at the pump from spiking, but prices are still high and are expected to get higher next year. This is not the behavior I’d expect to see from a commodity that is plentiful and cheap to produce.
For more on energy stories of 2007, Robert Rapier has compiled a nice listing here.
As mentioned above, the hurricane season was both historic and almost a non-event from a petroleum perspective. 2007 was one of the few years on record that two Category 5 hurricanes spun up in the Atlantic in one season, but prevailing weather conditions kept both of them to the south of the Gulf of Mexico, though Dean did bounce off of Mexico’s Cantarell field.
The other major factor climate-wise this year was drought. Both Australia and the Southeastern United States (among other places) were gripped with severe water shortages. This is having an ongoing impact with food prices and other commodities (cotton, for one) and will continue to be a factor in 2008.
The pain was not distributed evenly, though. As I write this, December 2007 is going to be one of the snowiest ones in recent years. Minnesota farmers will be very happy with the additional moisture next spring that these snows will provide.
I thought I was pretty pessimistic in writing about the state the US economy was in this time last year. If anything, I think I didn’t write in strong enough terms about how things would play out. Despite the happy talk we’re fed from the mass media about how strong the US economy is, I think many Americans and foreign observers would agree that things are not well, and will probably get worse before they get better.
Take your pick from the decline of the dollar, the housing market implosion, or the fun & games going on in Wall Street and in world financial markets. On a macro-economic level things look grim. I’d provide links to back this up, but most of what I’ve been writing about in recent months has had to do with this fiasco.
All things being equal, the Middle East could have been much worse in 2007. The Israelis were pretty quiet, we didn’t bomb Iran, and there were few major incidents in Iraq or Afghanistan (beyond the prolonged attrition and the Blackwater scandal). There was little concrete progress made in setting up a strong government in Iraq… I suspect that has to do in part with the realization in D.C. that a true representative government in Baghdad would probably not be friendly towards the US nor big business. It appears to me that the US will be happy with the status quo until after the 2008 presidential elections, at which point it becomes someone else’s problem.
There are always wild cards in this region, though. I’ll be curious to see how the assasination of Benazir Bhutto today shakes up things in Pakistan. An unstable country with nukes is never a good combination. There are no guarantees that Musharraf will stay in power there, and whomever comes after him would likely be less likely to deal with the US.
Overall I think 2007 developed in the general direction I thought it would. I’ll be working on a list of things for 2008 over the next few days and hope to get it posted sometime in the next week or so.
Hope Santa was good to you.