The Automotive Bailout

Which should not have been. At least, not with the TARP funds. But then again, politicians are stupid. I'd like to quote from a conversation on Coast to Coast AM between Dr. Michio Kaku and Art Bell. This took place during hour two of the show dated 30-NOV-2007. The reason I'm quoting is because both Mr Bell and Dr. Kaku said something profound.

AB: "If you go back to the 70's, we had the oil shortage ... I was part of that where we all stood in line ... you know, waiting for gas; it was horrible. Fist fights broke out, it was, you know, disruptive."

MK: "Right."

AB: "At that point, Detroit began to make smaller cars, copying the Japanese, but the moment oil eased ... there was nobody looking ahead another 10 or 20 years, 30 years; nobody. And so we went right back to making big cars again, SUVs all the rest of it, and now here we are again - same deal."

MK: "Yeah, and this time there's no bailout for General Motors, or for Ford..."

AB: "Yet."

MK: "Because two reasons: One, people know that high-tech is huge and we don't necessarily rely on automobiles to keep the economy going any more, right? And second of all - like I said; they bungled it. I mean, General Motors and Ford, they made the mess, right? They are to blame for the fact that they ignored all these warning signals; they ignored all the moods of the consumer, they have the least energy-efficient cars of any large automobile maker; they hold the rear on every single measure of safety, quality, and especially fuel-efficiency. And that's just to take a small example."

OK...now there is a lot there. But a few profound things were said ... and dare I say it ... prophetic things. First, we know that immediately following the Arab Oil Embargo, Detroit began to make smaller, more fuel-efficient cars. They did this in response to Japanese sales going through the roof, as well as the soaring price of oil. However, as Mr Bell pointed out, the moment that the oil began flowing more freely again, Detroit went right back to making the bigger, less fuel-efficient models. It was as if the lesson, if it had been learned at all, was promptly forgotten. Fuel prices went back down, and the American people went back to their old ways. Again, it was as if the American people had learned their lesson, it was promptly forgotten.

Fast forward to 2007-2008. As the oil prices began to rise, the American people became more concerned about fuel-efficiency. When oil prices peaked at near $147 per barrel, the result was that people again began to purchase more fuel-efficient cars.

But let's go back to what Dr. Kaku said: that General Motors and Ford made the mess. Now, we can argue that the American people are also to blame for this. After all, we could have gotten off of oil 30 years ago if only we'd have had the political and social will to do so. Now that crude oil is trading at $39.02 per barrel, the fuel prices are also dropping. Although, I'd be willing to bet that we will not see $1.00 per gallon petrol again.

But there's another reason for this particular posting. If you remember, the oil embargo was placed upon the United States, Great Britian, Western Europe, and Japan for their support of Israel during the Yom Kippur War (which the Arabs, lead by Egypt and Syria, started by the way). In fact, from the Wikipedia article on the Embargo:

"August 23, 1973—In preparation for the Yom Kippur War, Saudi King Faisal and Egyptian president Anwar Sadat meet in Riyadh and secretly negotiate an accord whereby the Arabs will use the "oil weapon" as part of the upcoming military conflict.[8] " (Wikipedia's hyperlinks left intact.) Link: http://en.wikipedia.org/wiki/1973_oil_crisis

Two words are critical here: oil weapon. Let's examine part of the reaction of the Embargo: "The British, French, and Japanese reversed their previously pro-Israeli policies as a result of the Arab oil embargo, and became more pro-Arab in the following years." Link: http://groups.google.com/group/alt.politics/browse_thread/thread/dc7ad5bc9d8bf085?q=arab+oil+embargo

But it gets worse than that. As stated earlier, fuel prices are falling, as are oil prices. And, the American people might go back to their old ways and ... you know the rest.

The problem is that many people are believing that Barack Obama will abandon Israel in favour of talks with the Arabs. But you need to understand the Arab mind-set to know how this will play out. They'll take it as a sign of weakness, and I firmly believe that the current fighting between the terrorists of Hamas and Israel will intensify.

Will there be another Arab-Israeli war? At some point, almost certainly. This year, 2009? Possibly.

But remember what I said earlier - people are thinking that Barack Obama is going to abandon Israel. I believe it as well.

I think we're in for more trouble than we ever imagined.