Most people are concerned about the high cost of gasoline. The countries that produce oil are, of course, thrilled. In the Middle East, people are paying millions of dollars on car license tags with unique numbers. Evidently, having a Rolls Royce isn’t enough to make you stand out over there. Saeed Khouri paid $14 million dollars to be able to put a license tag containing “1” on his car.
People living in the US and other countries that are primarily consumers and not producers of oil are less fond of the current pricing trend. However, in an effort to always discover the silver lining, we are going to look at some of the potential benefits of expensive oil.
- Technological investment. When oil is cheap, it can be hard to justify investments in research that will be necessary to move away from fossil fuels. When oil is expensive, there are more commercial options for fuel. Even technologies like hybrid vehicles start looking more cost effective. A period of expensive oil gives companies a chance (and motivation) to innovate in areas that might not normally be profitable. It encourages them to take risks that no one could justify when gas was $1.50 a gallon.
- Bringing back manufacturing. With expensive fuel, some of the manufacturing that was outsourced to China is coming back home. This is particularly true for heavy items. Don’t expect all of the factories to move back, but when a new business is starting up, they are going to be more likely to at least consider keeping things local.
- Local food production. When it is expensive to transport food, it starts making more sense to grow crops close to where they will be consumed. If farmers can get more for their produce at the local farmer’s market or by selling directly to a grocery store, they may be more likely to grow crops that they had previously abandoned due to the cost of physical labor. These types of crops produce more jobs which can help lower unemployment.
- Preventing urban sprawl. People will tend to cluster together more when transportation is expensive. While this isn’t always good, it does have some benefits of allowing technological investments that are only practical in densely populated areas. It also helps cut down on the number of vehicles people need.
- Public transportation. There are some great benefits to public transportation, but it is hard to justify the expense when most people don’t use it. With the surge in gasoline prices, many more people are looking into public transportation and it is much easier for cities to justify the expense when it is being heavily used. Even if gas prices come back down, the shift in mentality may stay and keep people using public transportation, which would help keep gas prices low.
- Work arrangements. Utah is moving most of their state workers to a 4 day work week. Companies are working out telecommuting arrangements in order to retain employees whose paycheck isn’t going as far as before. (Now is probably a great time to approach your boss about a work from home arrangement.) Over time, these types of shifts may establish new work models as a norm.
Maybe I’m being optimistic, but (barring a total economic colapse) I think we are going to see some benefits from high gas prices over time. When the price of oil falls again, maybe some rich people in the Middle East will have to settle for double digits instead of single numbers on their license tags.
#2. Drilling for our own oil brings manufacturing back also.
#3. Lowering unemployment would make more sense if low-wage illegals weren’t doing the labor eh?
Doesn’t the concern about exporting jobs seem contradictory to the lack of concern about importing cheap labor.
#4. The one thing the Euro’s seem to have right is not so much the control of urban sprawl but the lack of urban and rural eyesore advertisement and more human building codes.
#5. Public transportation is a joke. Everywhere. Amtrack works because the rest of the nation pays for the NE to afford it. Recently as ridership on public buses increased so did the cost. Paying $3 to wait on a ride to and from ONE place (heaven forbid you have a doc’s appointment AND want to go shopping) that is only 10 miles away AND it’s a humid 90-95 degrees out isn’t really a solution for many people. Actually for very few people. Not everyone lives in downtown big city USA or perfect climate Mexifornia.
#6. More people could work from home, part of the time, at least. Again though I doubt the numbers are so large that even with 100% compliance it matters.
You know the mantra is it will take 10 years for oil drilled now to make it to the market, a wildly inflated number, says nothing of the time for ‘alternative energy’ to come online. Remember the 70’s oil crisis the VERY SAME arguments were being made as they are today. That was 40, FORTY YEARS ago, ya well, where is all the alternatives? Apparently we are willing to quit drilling on the bet Messiah Gore and Pelosi by sheer willpower and dictate have the solutions otherwise hidden the last 40 years. If throwing money at it and demanding alternatives were the answer why haven’t the Euro’s done it?
Dustin Huibregtse says
Great argument on both sides, but I am having a hard time with the comment.
I believe you are correct in the fact that the arguments about expensive oil were made forty years ago, but wouldn’t it be true to say that because oil went back down in cost that people backed off of all the research? That people backed away from the information related in this article?
I believe in innovation, and I also believe that the first company to hit the gold mine first as well as the first country to create the most, not alternative, but the next best fuel will be better off. No more paying into the super development of other countries and time to reinvest back home.
Great post Mark!
Oil prices went down because of the incentive to find and drill for more went up leading to an oversupply and stable prices for 30 -35 years. Isn’t it a little less than coincidental during this time 85% of the US was placed off limits to drilling? A move that seems to mirror your argument it is only through high oil prices will there be incentive to research for alternatives. In essence let’s charge the American people 10’s if not 100’s of billions dollars a year in artificially higher prices in order to spur innovation? Well why not eh? Isn’t that what Euro’s do with extremely high gas prices and have been doing? So where is their innovation?
There is no doubt there is a gold mine at the end of the alternative energy rainbow. Why isn’t it incentive enough? You do know the government makes more off oil than the oil companies themselves? You do know the so-called “corporate welfare” for oil companies is countered by ever increasingly numerous and large “tax incentives” for all sorts of alternative schemes. Besides since when has the government been shy about throwing money at pet projects?
Given the above, high Euro gas taxes for the past decades, given the huge payoff of alternative energy substitutes either for auto’s or electrical power, AND government backing why we need to force poor and middle class to artificially pay more then they might otherwise have too while waiting for Messiah Gore and Pelosi to lead out of the darkness?
My own suggestion is, power. Political power. Prolly the 80/20 rule applies. The green movement is 20% ‘green’ and 80% political power.
ok, 100’s was an overstatement :)