$5 Gas?? "What If?"
Yesterday, I introduced the book $20 Per Gallon that was recently reviewed on NPR's Talk of the Nation.
I promised a post today about my hypotheses for "what if" gas reaches certain levels.
Well, I'm going to cheat a little bit because I'm only going to talk about part of the price range beyond the current price.
Today, I'm going to discuss what I think might happen if gas were to go back to $4 per gallon and reach $5 per gallon soon after that. I'm going to leave the $6, $8, $10 and beyond scenarios for another day.
First of all, for gas to move back up to $4 per gallon, would require either a great deal of speculation and/or an economic recovery. This recovery would probably be worldwide, but it's possible that it could happen mostly in China and India and only a little bit in the U.S. and Europe.
Right at the moment, there is a glut of oil on the world market. Gasoline demand needs to rise for prices to go up substantially, or production somewhere would need to be shut in.
All in all, it's quite unlikely that gas will go back to $4 per gallon before next summer.
Nevertheless, it's a good idea to think about what might happen if it did. Long-term planning is necessary for energy policy, and thought experiments are an avenue toward that.
So, let's write out an imaginary schedule. We will assume that the recession ends around next February, although most people don't know it. Unemployment starts decreasing at that time, and recovery is evident to many people around April of 2010.
Over in China, the recovery has started much earlier, and their demand for gasoline starts pushing oil market prices upward in January of 2010.
Gas reaches $3.00 per gallon around Memorial Day 2010. This is tolerated fairly well by businesses and individuals.
The price creeps up to $3.45 around July 4th of next year. There's mild grumbling, and small cars and hybrids sell better than large vehicles.
In mid-August, a major hurricane destroys a number of Gulf oil platforms. This causes gasoline to hit $4 per gallon.
What happens?
People are more attuned to watching their expenses after their experiences in the current recession. So, people start consolidating errands and driving less on the weekends. The auto industry is hoping for a sales recovery, but sees recovery mostly in the sale of smaller vehicles.
However, the economic recovery continues, albeit a bit more slowly than before. Because people saw $4 gas during 2008, they are concerned but not alarmed when they see it in late summer 2010.
Let's say that this happens in spring of 2011. I am going to list some trends that might occur, under the headings "Hot," "Not," and "Worrisome."
HOT
- Small, sporty vehicles
- Local food e.g. farmers' markets
- Bike commuting, especially among the 18-40 year old set
- 4-Day workweeks (4 x 10 h) and part-time telecommuting
- Shoes that are appropriate for walking
- Small lawns and mixed plantings
- Real estate (especially urban). Suburban and rural market isn't totally dead.
- Summer vacation on Amtrak
NOT
- Used or new SUV's and large cars
- Cars for teenagers. Many teenagers start driving at 18 or 19 rather than 16 or 17.
- Shoes that are ill-suited for walking long distances
- Large lawns that require a riding mower
WORRISOME
- Highways, roads, and subdivisions are still being built with little thought to bicycle access. Some are still built without sidewalks. Bike community is growing, but consensus for mandatory bikeway planning is only starting.
- Real estate prices in suburban and rural areas are recovering rapidly. Property owners who buy now will be walloped in a couple of years when gas prices rise to around $8/gallon.
- Activist groups are creating delays in nuclear energy licensing.
- Many people still "drive everywhere" and do little walking or bicycling. They will be very poorly prepared for the road ahead.
My next post will be more exciting and "interesting." In it, I will consider what might happen should gasoline prices reach $6 or $8 per gallon. For now, note especially the "worrisome" trends, because I will refer back to them.
Labels: gas prices

