A Tipping Point for Oil?
Over the past couple years of skyrocketing gas prices, I had heard there would be a point when Joe American would finally change his behavior by driving less or carpooling and demanding more fuel-efficient vehicles in the face of rising energy costs. For several years, $2 was the price per gallon that would supposedly tip the average us into that change and when $2 per gallon came and went, that figure was shifted to $2.50 per gallon. It turns out the number may be $3.22.
For the first time since March 1979, there was a year over year decline in driving for the month of March. Better still, the decline was the sharpest year over year decline since 1942. The decline resulted in 11 billion less miles being driven this March than last March which is a remarkable reduction and one likely to continue and possibly increase based on the substantial rise in gas prices since March.
I don’t know how gas prices could go down significantly any time soon, which is having and will continue to have a major impact on the people who depend on their cars and gas for their livelihood, etc. Since we are past the point of having the ability to make a subtle cultural shift weening ourselves off of gas and oil over the course of decades, I hope the positive impact of untenable gas prices outweigh what will certainly be severe growing pains for many people and industries (I, one, cry for the traveling band).
One surprisingly simple plan, though certainly not a cure-all, suggests that if Congress were to mandate that all new vehicles sold in the US must be flex fuel ready, all new cars sold worldwide would eventually be flex fuel ready as well due to the size of the US auto market. (Edited to add: upon further thought prompted by the comment below, a better solution, in my opinion, would be much higher fuel standards mandated by Congress. This allows industry to devise the technology by which oil use would go down, as opposed to Congress.) The will of the people might not be at that point yet, but perhaps we will get there when we see $6 or $8 or $10 per gallon?
Updated to add:
It says here we haven’t reached a tipping point.
Not many people would go that far to save a few dollars. In fact, most consumers don’t adjust their driving patterns in the short term, said Chris Lafakis, an associate economist at Moody’s economy.com in West Chester.
“There’s no tipping point,” he said.
“For some years now we’ve been saying this is the threshold price that’s going to cause the economy to spiral in a nasty recession and consumers are going to stop buying gasoline, but each time that forecast has been issued people have continued to buy gasoline,” Lafakis said.
In other words, many suburban drivers are resigned to forking over a C-note a week for gas. Aside from getting a hybrid, they say there’s little else they can do.
There you have it, Chris Lafakis calling me a liar. We’ll see what happens when the driving report for April and May come out. We will see, indeed.
Popularity: 3% [?]
I’m a little skeptical of the proposed plan (which, I confess, I’ve only skimmed) for a few reasons:
1) Bio-fuels like ethanol aren’t really that much better than oil from an environmental standpoint. They require a lot of energy to produce and distribute, and they tend to come along with a lot of negative externalities like corn subsidies, poor land use, agricultural runoff pollution, etc, etc, etc.
2) Mandating a particular technological solution tends not to be the most efficient solution, and this particular solution has problems (see my point 1). I’d be much happier with an increased federal tax on gas (on the order of a dollar or two per gallon) and let the market work out a solution as demand for gas (hopefully) drops.
3) I’m very skeptical of solutions which purport to allow us to continue to consume energy at current rates, but which substitute some other source for (Middle Eastern) oil. The long term solution to our environmental and energy problems is to consume less. Of course, that’s a very hard sell.
In my heart of hearts, I long for a Congress and President with the vision and political chutzpah to implement policies that fundamentally address energy policy on the demand side: taxes on bad energy sources, subsidies (that are eventually phased out) for good ones.
Thanks for making me think about this further. My intention with this post was more to share my giddy excitement at the possibility of the US driving market reaching a tipping point and not so much what we can do about our dependence on foreign oil.
I’ve changed the post around a little bit to reflect that. What I thought was interesting about the solution was how Congress creating a threshold for cars to be sold in the US would have a giant impact on the world-wide auto and oil market, not necessarily the flex fuel terms of the law.