[Marxism] How oil burst the American bubble

[Louis Proyect]

Something Had to Give
How Oil Burst the American Bubble
By Michael T. Klare

The economic bubble that lifted the stock market to dizzying heights was 
sustained as much by cheap oil as by cheap (often fraudulent) mortgages. 
Likewise, the collapse of the bubble was caused as much by costly (often 
imported) oil as by record defaults on those improvident mortgages. Oil, 
in fact, has played a critical, if little commented upon, role in 
America's current economic enfeeblement -- and it will continue to drain 
the economy of wealth and vigor for years to come.

The great economic mega-bubble arose in the late 1990s, when oil was 
cheap, times were good, and millions of middle-class families aspired to 
realize the "American dream" by buying a three (or more) bedroom house 
on a decent piece of property in a nice, safe suburb with good schools 
and various other amenities. The hitch: Few such affordable homes were 
available for sale -- or being built -- within easy commuting range of 
major metropolitan areas or near public transportation. In the Los 
Angeles metropolitan area, for example, the median sale price of 
existing homes rose from $290,000 in 2002 to $446,400 in 2004; similar 
increases were posted in other major cities and in their older, more 
desirable suburbs.

This left home buyers with two unappealing choices: Take out larger 
mortgages than they could readily afford, often borrowing from 
unscrupulous lenders who overlooked their overstretched finances (that 
is, their "subprime" qualifications); or buy cheaper homes far from 
their places of work, which ensured long commutes, while hoping that the 
price of gasoline remained relatively low. Many first-time home buyers 
wound up doing both -- signing up for crushing mortgages on homes far 
from their places of work.

The result was metastasizing exurban home developments along the 
beltways that surround major American cities and along the new feeder 
roads that now stretched into the distant countryside beyond. In some 
cases, those new homeowners found themselves 30, 40, even 50 miles or 
more from the urban centers in which their only hope of employment lay. 
Data released by the U.S. Census Bureau in 2004 showed that virtually 
all of the fastest growing counties in the country -- those with growth 
rates of 10% or more -- were located in exurban areas like Loudoun 
County, Virginia (35 miles west of Washington, D.C.) or Henry County, 
Georgia (30 miles south of Atlanta).

At the same time, cheap oil and changing consumer tastes -- pushed along 
by relentless advertising campaigns -- led many of the same Americans to 
trade in their smaller, lighter cars for heavy SUVs or pickup trucks, 
which, of course, meant only one thing -- a significant increase in oil 
consumption. According to the Department of Energy, total petroleum use 
rose from an average of 17 million barrels per day in 1990 to 21 million 
barrels in 2004, an increase of 24% -- most of it being burned up on 
American roads.

full: 
http://www.tomdispatch.com/post/174888/michael_klare_barreling_into_recession