$5 gallon gasoline next?

We're already at $4 in selected U.S. spots. And, Peak Oil, not just the unrest in Libya, is a cause, it seems.

"Peak Oil" only comes strongly into play if demand is pushing upward fairly rapidly.

And it is.

China has already passed the U.S. in coal use. By 2020, it may pass us in oil consumption.

Since we may well have hit "Peak Oil" three years ago, if China doubles its oil use in a decade or less, that will inevitably put upward pressure on oil, and thus gasoline, prices.

In Canada, where gas prices are fairly similar to those in the U.S., gas is at $5 a gallon in liter equivalents already. That's leading to talk of gas at $2 a liter, or about $7.50 a gallon, being just a year or so away.

In case you think any of that is due to cheap Canadian money, the loonie is trading with the U.S. dollar at rough parity.

So, we could see gas at $5 a gallon in the U.S. heartland a year or so from now, and $6 a gallon in places like New York City and San Francisco.

Now, the one silver lining? Per Rubin's column from Canada, this could mean, if not the end, at least a partial reversal of globalization. He touches on that more in a book, Why Your World Is About to Get a Whole Lot Smaller: Oil and the End of Globalization. And, he's not alone. Walmart, when oil prices hit $147 in 2008, was already talking about how some of its supply chain might have to move back from overseas.

That said, U.S. workers wouldn't benefit, in many cases. Mexican maquiladoras would see new spurts ... if U.S. companies could stomach the overhead of armed guards against drug lords.

That then said, such actions could spur Mexico into further disintegration, with major manufacturers extending their security forces outside their factories and creating de facto statelets.

At the same time, don't forget that hear in the U.S. President Obama refused to tackle the need for more regulation of commodities derivatives as part of financial regulation reform. If Peak Oil is here, Enron of a decade ago will seem like nothing.

Subprime crisis a reflection of larger debt-investment problems; possibly comparable to Enron derivatives

Jim Jubak explains the incestuous relationship between credit-rating agencies and banks, and how the subprime crisis has left a lot of emperors’ new clothes exposed:

It's important to understand that bond professionals don't want to think badly of the job done by the credit-rating agencies. The bankers pay the rating agencies' fees. (Bet you didn't know that. Yep, the issuers of debt are the ones who pay the bills.) The bankers literally sit across the table from the rating agencies. The banks poach anybody on the other side of the table that they think has the talent to work for them. And the banks rely on the credibility of the rating agencies to sell their debt offerings. It's a pretty cozy club.

But the subprime debacle has been big enough to disrupt the club. Buyers of packages of subprime mortgages and derivatives based on these packages that have been burnt by rising defaults on these mortgages and falling prices for the debt they hold have angrily wondered if banks issuing the debt disclosed all the risk. And the banks have passed the buck, saying, that they relied on the ratings from the three agencies.

As a result, Jubak said, this is part of why not just the ratings agencies in particular, but Wall Street in general, hasn’t reacted faster to the subprime crisis and its possible larger economic effects, specifically the problems with mortgage-based securities.

Several issues here.

First, where is a Democratic Congress, in failing to push for new regs out of either the SEC or FDIC to eliminate this incestuousness?

Probably waiting for “new Democrat” financial donors, which it has often been since the Clinton days.

This would be like Ford or GM paying Consumer Reports for their car ratings. It’s ridiculous.

It’s ridiculous it took the subprime crisis to expose this, if “expose” is the right word for something still generally flying well beneath the Big Media radar.

Beyond that, there’s the fact that these particular securities, known as collateralized debt obligations, are big turkeys in their financial performance. And, to the degree small investors have gotten talked into them, they could take a bit of a bath.

And, these are very complex debt-based securities. Jubak says many people, not small-time buyers, but even bigger pros, can’t analyze them well. He even draws Enron-type comparisons.

It’s ridiculous nothing has yet been done.