The end of the best of times
Some time ago, I wrote about the end of cheap oil. The oil economy is definitely on my mind today because we are in transit. As I write this, we are snaking into Ohio from Pennsylvania on the turnpike. I am wondering how much longer Americans can take for granted simply getting into your car and taking it anywhere you want to go.
There are scary signs out there for us drivers. If they are causing jitters on Wall Street, they should at least make our hearts skip a beat.
- Crude oil prices spiked past $67 a barrel in open trading on Friday
- Gasoline prices hovering near $2.50 a gallon
- The markets are nervous about our ability to refine all the oil we are importing. Refineries do not have much excess capacity. Moreover, it is difficult to finance and locate new refineries.
- General uncertainty about our foreign oil supply
It may be that these oil spikes will be a passing phase. Frankly, when I first wrote about the end of cheap oil, I did not imagine it would get this expensive this quickly. I wrote about $150 a barrel oil prices as being something fantastic. Now it seems quite plausible. After all a year ago, the price of a barrel of crude oil was $40. Now it is at $67 a barrel, an increase of more than 50% in one year. You would think that with such high prices that demand would be dropping, but that is not the case.
Economists tell us that there are few better ways to stimulate the supply of a commodity than a sustained high price. One expert on the talk show circuit assures us that there are large new untapped oil reserves out there. He says that they will add much more new oil onto the market the within the next decade, bringing down prices. Perhaps these new supplies will buy us another decade or two of the status quo. Perhaps the increased cost of oil will make it economically viable to mine oil from shale, or to use synthetic fuels like ethanol. Nevertheless, as National Geographic points out in its most recent issue, these new approaches will help but is no silver bullet. More people are coming and they will demand more energy.
Demand shows little sign of slacking. In addition, it is not just emerging economies like China and India are driving new demand. The United States needs more and more oil too. Our population keeps expanding. Moreover, the way we are growing is fueling even more demand. People tend to live where they think they will get the best value for their money. Not surprisingly then they prefer the outer suburbs where land is relatively cheap. However, by making the choice they also exacerbate our nation’s oil dependency.
Today, for example, we were trying to wend our way from Northern Virginia to Frederick, Maryland. I could not help but be astounded by all the growth in Loudoun Country, Virginia. Reputedly, it is currently the fastest growing county in the country. My memories, only a few years old, recall the area of U.S. Route 15 north of Leesburg being only a two-lane road. Now it is four or six lanes as necessary. Townhouses, condominiums and ubiquitous shopping centers crowd along the edges of the road. Frankly, I find this kind of crazy growth disturbing and more than a little frightening.
Of course that far out there is little resembling public transportation. The closest Washington Metro Station is probably twenty-five miles away. For the most part people who live in Leesburg work elsewhere. Typically, they work ten to forty miles from where they live. There might be a commuter bus or two that wends commuters from Leesburg into Washington D.C. every day. However, only a fraction of these commuters needs to go to the big city. Most are moving from an outer suburb to an inner one. With virtually no other choices, they get there by car.
Consequently, for these new homeowners a car is an absolute necessity of life. Of course their cars must have gasoline. This new growth has created an already amazing amount of congestion in the exurbia along roads like Leesburg Pike or Sully Road. Where will the oil come from to keep these commuters mobile? What if the oil is simply not available to sustain their lifestyles? What then?
It is a hard question whose consequences are hard to think through. If the situation were to last for any length of time, there would be huge economic problems. We would be fortunate if the situation merely instigated a recession. A depression seems much more likely, along with huge amounts of inflation. In the short term, some sort of gasoline rationing would be needed. Our experience during the oil shocks of the 1970s does not bode well for this decade. Those 1970s oil shocks might be relatively mild by comparison. Back in the 1970s, we pumped most of our own oil out of the ground. Now we import far more oil than we pump from our fields. Expecting new oil fields like the Arctic National Wildlife Refuge to solve our problem is naïve. Even if we could get at the oil, we could not draw it fast enough to make much difference in our oil dependency.
If we did not have enough oil it is not like these people living in exurbia could suddenly turn to public transportation. It could not begin to cope with the demand. It would take decades to rearrange our infrastructure to suit an oil-diminished reality. I am not sure if it is even possible. Our whole infrastructure is no longer arranged for public transportation. We live too far apart. Even if public transportation were available, getting from A to B would likely take much longer.
There was a time not too long ago when we lived in villages and life’s necessities were nearby. This became clear to me during our last vacation. We spent one night in Schenectady, New York, the city where I was born. I was amazed by how convenient everything was. You could easily walk to your church, to the store, to your school and to your job. The streets were narrow. The lots tended to be small. What happened? The automobile made the village less attractive. So there was little reason not to build your house out in the country where the land was cheap, since the cost (reasonable commuting time) was less than the benefits (cheaper land, privacy etc.) Cheaper land and cheaper labor elsewhere also drew jobs away from these villages and small cities. It was all predicated on a sustainable economy forever based on oil.
Moreover, our new economy has exacerbated the situation. It is often cheaper for me to order my medications from a mail order pharmacy than to patronize a local pharmacy. Some of our medications are shipped from Phoenix, Arizona to Northern Virginia packed in several pounds of ice. It is cheaper, yet it carries with it a hidden transportation surcharge: the oil that is needed to move it from there to here.
Yesterday our dryer stopped working. This gave me a good excuse to knock on our neighbor’s door. She was happy to let us use her dryer since we were in urgent need. On her kitchen table was a bucket full of tomatoes. Yes, it was tomato season and she was reduced to giving them away. She persuaded me to take a few with me, which I consumed with supper. They tasted delicious and were clearly better than anything I could purchase at the store. Tomatoes sold in stores, of course, are engineered for transportation, not taste. I marveled that I could eat something so delicious that did not cost me any money and was grown a couple hundred feet from my house. No petroleum products were needed to get it from the supplier to the consumer.
In our modern world, we are blessed with a seemingly infinite variety of products. However, the variety does come at a cost since almost all are transported to us using oil based products. Unless we can find a substitute for oil in our not too distant future, or unless there is a lot more oil out there than we think, our times will be a changing. The life you are living will likely seem nostalgic to your children. Perhaps your grandchildren yet unborn will be incredulous that you lived through such a marvelous time.
I sense that the transportation economy we have known may be coming to a rapid end. I suspect it will arrive sooner than we think.
