Friday, September 14, 2007

$100 a Barrel Oil: What It Means

Suburbia as we know it is going to shrink in a big way.

It's going to happen because Mcmansion heaven demands a lot of refined oil, water and electricity. But the reality is there are major water shortages in most high-growth areas. Look at any sprawling metro area from south Florida to Las Vegas and you'll see an irreversible water crisis developing. And yet spurbs (my word for a sprawling urban/suburban area) continue to go up with plenty of water-intensive golf courses and lawns around them! And how will the spurbs be powered? With more power plants? Coal- and nuclear plants all use billions of gallons of water. By 2030, utilities could account for 60% of all non-farm water use. They are costing billions to build and almost no community wants them nearby. Due to the proliferation of electronic appliances from big-screen TVs to whole-house computer systems, spurb-home power consumption is outpacing population growth. With the nation's power demand expected to grow 50% over the next two decades, there won't be enough power to go around if we continue on this course.

We've Big-Boxed Ourselves into a Cul-de-Sac.

Bigger homes, bigger cars, bigger highways and bigger retail space mean one thing: Big problems and lots of energy needed to make this lifestyle run. Spurbs that invite in big-box retailers poach traditional downtowns and established businesses. But these retailers know no limits as they constantly build larger stores to one-up the big box down the street. That leads to an economic death spiral. In order to live in the spurb, you need that SUV to drive to the supercenter and the only way you can pay for it is on credit. You can't afford any of it because salaries aren't keeping up with the true cost of living! Even more devastating is what it does to land and communities. There are now more than 4,000 abandoned shopping malls in the US and more retail centers than high schools. That's 20 square feet of shopping for every man, woman and child. What powers all of this driving to and fro and our electronic-obsessed lifestyle? Cheap oil, natural gas and coal. At least two of those commodities continue to rise in price due to unprecedented demand.

You may have noticed in the din of your life that oil hit $80 a barrel on world markets. Normally that doesn't translate into higher gasoline/fuel oil products until a few weeks after it happens. And it may not mean much unless the price stays high and commodities traders haven't locked in at lower prices. Most of the run-up has been due to the developing world and the West drinking up every possible drop of oil. China and India want their piece of the petroleum economy and are willing to do anything to get a hold of black gold. Combined with insatiable demand in North America and you have the formula for $100 a barrel oil. Any "supply disruptions" such as the hurricane that hit the refinery alley on the Louisiana-Texas border tack on even more price increases -- particularly in gasoline.

So where does that leave us? We're headed for some huge changes. Maybe the US will get wise and build more trains, particularly high-speed trains that link regional cities. They've been talking about it for decades in Florida and Texas, two states that would be perfect candidates. There hasn't been the political will because gasoline has stayed below $4 a gallon. When gasoline is priced at what it is in Europe -- $5 a gallon (including hefty taxes) -- then we'll be seriously discussing greening our metroscapes. A carbon tax also will help. Until then, the ominous headlines on the business page will be like Halloween: Scary for a day, then they go away.

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