By David L. Brown
Yesterday saw oil prices break through the $130 mark and continue to climb without even a pause. This morning it had already advanced to $135. The trend is unlikely to reverse itself anytime soon, and probably never. That is because the evidence is mounting to support the idea that so-called Peak Oil has been reached.
Here is a map showing present gas pump prices in the U.S. as we enter the Memorial Day weekend, the classic start of the Summer vacation driving season:
Yesterday I bought a fill-up of 87 octane regular gas at the nearby Shell station, and paid $3.699. Diesel was at $4.549, and the premium grade of gasoline was over four bucks. No doubt the next time I need fuel it will be significantly higher, considering the rising cost of crude. And I live in central New Mexico, which as you can see has been moderately hit by rising costs, especially compared to places such as California, Illinois, New York and other regions that are already in the red.
The world runs on petroleum, and the world is running out of petroleum. These are two irreconcilable facts that equate to an economic trainwreck of epic proportions. As we have discussed here at length, the problem has no easy solutions and, worse, it is creating new problems such as the looming famine as Third World countries discover there is not enough rice and wheat to go around. Guess who won’t get any? And the anger will be intense as starving people learn more about the atrocity being committed by the Lords of Ethanol as they turn corn into fake fuel.
I have stated before that higher oil prices are a good thing, because that is the only stimulus for America and the world to change from its addiction to cheap energy. But that optimism focuses on the long view; there is no doubt that serious disruption is and will continue to occur in the present. The problem is that we should have prepared for the End of Oil beginning about 40 years ago.
The signal is becoming strong enough to have a real effect now. I would venture that many Americans will be changing their Summer plans and sticking close to home. It would be an unfortunate thing to be the owner of a resort somewhere in a remote location.
The makers of big RVs are in real trouble. Only the very rich or the very stupid are going to invest in a behemoth of a vehicle that is lucky to get five miles per gallon when fuel prices are shooting up like a Fourth of July rocket. And owners of campgrounds are probably facing especially slim pickings this season as existing RVs remain parked.
Some analysts are predicting that oil will hit $200 per barrel, and that in the U.S. pump prices might eventually reach $8 or $9 per gallon. Now that would really create some havoc, especially for those who have unwisely purchased homes far away from their workplaces and invested in inefficient SUVs to make the commute. There are many in this situation, driving 40, 60, even 80 or more miles each way just to get to work. Imagine a 160 mile daily commute in a vehicle that gets 14 m.p.g. and with gas at, oh let’s just say $5 a gallon, a price we may reach very soon. The fuel cost alone would be $57 per day, $285 for a five-day week, well over a thousand dollars a month.
There is one positive thing, though, and that is that traffic will definitely be thinner. A lot of those cars, pickups, SUVs and big rig trucks that we are used to seeing clogging the highways will be parked somewhere. Bicycle sales will be soaring. Work-at-home jobs will be the gold standard of employment. Detroit will be in chaos, stuck with multi-billion dollar investments in assembly plants geared to producing “light trucks” that avoid the government fuel economy standards.
Take that commuter I mentioned above, with the 14 m.p.g vehicle. He or she would become pretty serious about buying an ultra-economical car. If they were to be driving a Prius that got 55 m.p.g., the daily fuel cost would be just $14.50 in my example. That would represent a saving of $42.50 a day, $212.50 a week, $850 a month. Pretty tempting. But those efficient vehicles are in short supply and it would take years for the major auto makers to develop and manufacture large numbers of more economical cars. Meanwhile, commuters will just have to suck it up.
Oh yes, there will be a different world, thanks to oil prices that make the profligate use of gas and diesel fuel no longer feasible for most Americans. The chaos in the meantime will be uncomfortable, to be sure, as we go through cold turkey withdrawal from the oil addiction. But at some point in the future, as we all become recovering oilaholics, the foundations will be laid for a sustainable energy future.