Like most of you, I struggle with the high price of gasoline. Personally I have been making changes to cope with the new economic reality. For a while I was able to absorb the increased expense by depleting my savings, but that is not sustainable. This diary will be a discussion on what bigger changes are in store for the global economy to deal with the imbalance between oil production vs demand. Please join me over the jump.
Contrary to reassurances that many governments (including our own) have been issuing for many years, global oil production is unable to keep up with demand. What will this mean for all of us?
- Transportation:
In the United States gasoline sales have fallen slightly (~2%) recently, vehicle sales are down significantly (especially for inefficient vehicles). New vehicles with dramatically increased efficiencies are headed to market. This development should result in continued declines in US gasoline consuption. Unfortunately it is doubtful that petroleum savings in the rest of the world can offset the coming wave of demand from emerging economies in Asia, at anything like current prices. As tranportation costs increase trains and boats will be more competetive with trucks. Imports of low priced goods from across the globe will cease to make economic sense. I once heard a saying, 'nobody imports bricks' perhaps that will apply to many other items as well. I expect a dramatic surge in usage of public transit, which should usher in a wave of new investment in such systems. Of course our current transportation infrastructure in the US is ill-equipted for dramatic fuel savings in the short term, I am confident that a crash program could make significant progress over several years.
- Development:
With the development of very reliable automobiles, good roads, and cheap oil there has been a move away from central cities toward suburban and ex-urban development. Many of these residential communities will have a difficult time surviving in a high gas price environment. Likewise there will be increased pressure on businesses to be located closer to their customers. Many of America's largest cities have lower population today than they did in 1950 (even as the overall US population has doubled). I expect renewed desire to live closer in to the city center to increase the quality of life in those communities.
- Global Warming:
While it would be welcome to see greater efficiency and a realistic respect for our natural resources, nothing I see coming down the line gives me any comfort that we are up to the challenge that global warming presents. The coming wave of energy demand is so great and the current response so weak that I expect increases in carbon dioxide concentration for many years. Perhaps some dramatic event will be a catalyst for serious action.
- Economic Growth:
I am sure that economic growth will be curtailed to deal with the challenges of peak oil. As we've seen with soaring food costs these disruptions can have devasting consequences for vulnerable populations. Billions of people live on a few dollars a day with absolutely no buffer room in their fight for survival.
Share your thoughts.