How do you propose to deal with the doubling of gasoline prices every few years now for the forseable future?

Would a doubling of the price of gas affect your behavior? Tripling? Quadrupling?

Actually, that wouldn't bother me horribly. I live very close to work, so mitigating my driving is quite easy. As a matter of fact, the more expensive gas gets, the more relatively wealthy I am as compared to those around me, on average.

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"Government big enough to supply everything you need is big enough to take everything you have... The course of history shows that as a government grows, liberty decreases."

-Thomas Jefferson

Yes, I too can walk to work, so the immediate impact of the price of gas wouldn't immediately affect me.

I kinda wonder about the food in my grocery store though. It is generally asserted that the average distance traveled by each article of food for sale is between 2000 and 3000 miles. That suggests that a rising price of gasoline will also entail a rising cost of food at the grocery store...

Likewise with those who's homes are heated with oil or natural gas. These prices will also rise in tandem with gasoline.

Likewise with the price of electricity itself, the majority of which is derived from burning oil.

So, if gasoline prices double over the next two or three years (and double again after that), its not just the gas price at the pumps that will be affected. Heating, electricity and grocery bills are likely to rise just as fast.

Well, I'd bet on seeing some sort of rise along those lines, but that will affect everyone proportionately based on how much food/heating/electricity they consume. Since I'm not a more voracious consumer than the average person, I'd imagine it will still leave me relatively wealthier.

I guess the whole effect might be to spur inflation at large. If everyone's cost of living is increasing by virtue of (relatively) inelastic demand for a necessity, compensation for cost of living will increase to keep up.

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"Government big enough to supply everything you need is big enough to take everything you have... The course of history shows that as a government grows, liberty decreases."

-Thomas Jefferson

Well yes, I'm in the same boat. My energy usage is below average so most everyone is likely to suffer worse than me. But that's not the real point here.

Are not rising energy costs most likely to reduce profit margins for those who pay that 'compensation'? What if our corporate employers need to reduce compensation so that they can survive in a high-energy-cost environment? That's always the way private capital deals with increasing cost of materials - decrease the cost of labor so that profit margins can be held steady.

That sounds like the potential for a nasty squeeze play. Double-digit rises in energy costs (and commesurate rises in COL) and falling real wages.

You may note that in previous cases of rapid rises in energy costs, real wages fell.

That's a good point - hadn't thought about the angle of reducing wages to maintain profit (just thinking about passing the cost on to consumers).

I'd imagine that, if things get bad enough, subsidies will be introduced as a band-aid. I wonder what it will take to spur a significant increase in the development of viable energy alternatives.

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"Government big enough to supply everything you need is big enough to take everything you have... The course of history shows that as a government grows, liberty decreases."

-Thomas Jefferson

I've been wondering that for over 30 years. If the '73 oil embargo couldn't overcome oil industry objections or wake up consumers enough to force the issue I don't know what will.

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A nation of slaves is always prepared to applaud the clemency of their master who, in the abuse of absolute power, does not proceed to the utmost extremes of injustice and oppression.
Edward Gibbon

Im more curious about how this will effect the global economy. The theory is that as the production of oil/gas inevitably diminishes the price will inevitably increase until we reach the point where it costs more energy to produce than the energy we get back. Without some miraculous new source of energy that competes with oil in versatility, cheapness, and oomph, the entire project of globalism will collapse. The population will plummet to 19 the century numbers, and the ecosystem will begin to bounce back. Or not..... the only certain thing is that oil and gas are finite and the price is set to increase...

Andrew

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Ethanol is a fabulous solution to our energy dilemma because it will provide more fuel for us to drive around and look for food.

-- Unknown

The alternative to the wage-squeeze is inflation. That's the strategy that was used in the 1970's. Even money says that it will be used again for the same purpose (this hides the wage squeeze with high inflation - your wages might go up 10% per year, but you still fall behind at 12% COL inflation - it is just less obvious).

Given that such a scenario is quite unlikely to be accompanied by a 'boom' economy, that means that the only way the government could possible finance such subsidies is through debt-finance.

And keep in mind that the general timing here coincides with the notorious 'Boomer' retirement period where Medicare and Social Security costs are expected to skyrocket (which is yet another drain on the public debt-finance position).

Ninety-million barrels of oil per day. That's how much 'alternative' we would need to find.

Peak oil theory suggests that this particular quantity is quite likely to be a physical maximum that cannot be surpassed. This number has been fairly steady for a half-dozen years now. Given present world population growth/demand, the supply/demand equilibrium of this product is guarenteed to rise and rise fast in the near to medium term.

A key economic issue here is the failure of the capitalist market to properly price oil in light of its future scarcity. It is a finite resource by definition (human perspective) and should not be as cheap as it seems to presently be. A steeply rising price of oil ought to send a private market incentive for viable alternatives, though, to be sure, this is the kind of philosophy that got us into this mess in the first place.

What seems doubly surprising is that the vehicles on the road (light trucks especially - pickups, minivans & SUV's) seem as big and heavy and fuel inefficient as cars were back in the 60's and 70's.

Consumers are still acting as if the price of oil will remain relatively cheap for the medium term. People are still buying big kick-ass SUV's. People are still buying sprawling suburban houses with an hour-long drive to work.

Actually, according to peak oil theory, once you are at the peak, you can't increase annual production - it will 'flat-line' for a while before it starts to drop off. This caps supply and with ever rising human demand, that will send the price flying sky-high long before production ever falls off 10% or 25% from the peak.

Oil will be around for quite a few decades yet to come. But the price will be increasingly steep. In the long term, production will fall, but in the medium term, oil production will likely be maintained, just not increased.

As the price of oil becomes comparatively astronomical, the incentives for alternatives also go through the roof.

A steeply rising price of oil may be the bane of our western economies, but the same steep price rise may be the only possible solution to the problem.

The flat line or plateau is only one possibility. When the US peaked they had no plateau, just a down slope. Globally there might be a plateau. I think it depends what happens in Iraq.
This all depends on how much we trust the opec reserve numbers, and from what i understand they are not to be trusted at all. Matt Simmons from the Cheney energy task force is convinced the Sauds have already peaked. This really leaves iraq as the world largest cheapest supply of undeveloped oil. I often wonder if climate change activism will ever succeed in diminishing the amount of oil we use... i doubt it though.
Except no alternative exists to oil/coal/gas. There are alternative energies for sure, but none of them can power the militaries of the world, provide the fertilizers for our food, power the planes and cargo ships, or compete in EROI. The future holds both an alternative energy infrastructure but also an alternative - and smaller - way of life - i hope it does anyway.

Im not convinced in the magic of the market place to solve this problem. I think it might have a chance if oil was actually subject to the free market. But oil supplies are heavily subsidized and regulated and protected by governments. And those governments are heavily in bed with powerfully resistant industry lobby groups.

Andrew

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Ethanol is a fabulous solution to our energy dilemma because it will provide more fuel for us to drive around and look for food.

-- Unknown

Just imagine if the people the west try to 'save' start to realize the same lifestyle?

Andrew

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Ethanol is a fabulous solution to our energy dilemma because it will provide more fuel for us to drive around and look for food.

-- Unknown

I've figured it out. At my current salary, gas would need to hit about $6.50 a gallon before it began to impact the way I drive. Of course, by the time it gets there, my pay will be higher, so it's a moot point.

My daughter is moving to New York at the end of October, and is selling her car (she really won't need it in the city). I had considered buying her Hyundai Elantra and selling my Explorer. But, after thinking about it, I like my Explorer, and can certainly afford to fill it up. Ergo, I'll not be driving an Elantra anytime soon.

The price of gas will always go up. Then again, the price of most everything else is always going to go up, too. I think the question that needs to be asked is why we focus on the price of gasoline, and all but ignore the price increases of almost everything else...

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Obama's New "57 State Patriotic Pin":




Sayeth John Drake - 10/13/08: "OK, you're right, I admit to LYING"

Affordability is (for me) unimportant. IMO it is simply wrong to use more energy than necessary. The environmental and security concerns are more important than how much gas and electricity I can afford.

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A nation of slaves is always prepared to applaud the clemency of their master who, in the abuse of absolute power, does not proceed to the utmost extremes of injustice and oppression.
Edward Gibbon