Sunday, May 18, 2008

MSN ponders the question...

What if gas cost $10 a gallon?
By Shirley Skeel
Published May 16, 2008 © 2008 Microsoft
Forget pizza delivery. And cheap airfares. And bottled water. In fact, forget a way of life that looks much like today's. But would that be so bad?

In four years, U.S. gas prices have doubled to more than $3.70 a gallon, and crude oil has tripled to around $125 a barrel. Allowing for inflation, that's higher than prices were during the 1978–83 oil shock that triggered a recession and sky-high interest rates. But . . .

What if gas cost $10 a gallon?

Thousands of truckers would go bankrupt. Airplanes would sit idle in hangars. Restaurants and stores would shut down. Car-pooling, hybrid vehicles, scooters and inline skates would swing into vogue. And telecommuting, rooftop vegetable gardens, home cooking and recycling would proliferate.

Yes, it would be painful. At $10 a gallon, filling a Ford Explorer could cost $225. Even gassing up a Honda Civic could set you back $132...

...Here are some likely effects:

* Consumer spending on eating out, clothing, electronics, vacations and other little luxuries would fall sharply. A Nielsen study found that even at recent gas prices, 41% of consumers were eating out less. In total, 18% of those surveyed were cutting spending to a "great degree..."

* We'd see "a lot of parked planes," says Bill Swelbar, an air transport engineer for the Massachusetts Institute of Technology. The U.S. airline industry pays out $465 million in fuel costs for every $1 rise in oil. At $350-a-barrel oil, the industry would pay more than $100 billion extra, almost as much as last year's total airfare sales. Even if airlines ratcheted up fares 50%, half of their airplanes would be grounded because they'd be too expensive to fly, Swelbar reckons...

* Many independent truckers, who pay for their own fuel, would go bankrupt as their costs soared and shippers switched to barges and trains. Taxis and FedEx would be strictly for the well-heeled. And home pizza deliveries would cease. Pizza delivery drivers also pay for their own gas. "It'd be brutal," says Joseph Miller, an assistant manager at a Domino's Pizza in Seattle. "I would think we wouldn't have any drivers."

* Food prices could jump by a third or more, experts estimate. About 80 cents of the $4.50 retail cost of a box of cornflakes goes to transport it, says Dan Basse, the president of AgResource, a Chicago research company. On top of that, there's the cost of fertilizers to grow the corn and diesel for farm equipment. In 2005, transportation and energy made up 8.5% of all retail food costs, but energy was far cheaper then. As $10 gas pushed up food prices, pinched consumers would give up pricey fresh meat and vegetables for cheap pastas and oils. Ranchers and dairies with energy-hungry milking barns would struggle. And cities might sprout to life as people planted vegetable gardens on their roofs and balconies and in vacant lots.

* Plastics for appliances, packaging, pacemakers and myriad other products would jump in price as the natural gas that plastic is made with rose in value alongside oil. Bill Wood, the president of Mountaintop Economics and Research in Massachusetts, says shoppers would have a choice: "Paper or paper?" Small plastic bottles of water would disappear. Glass and metal containers would make a comeback. And recycling would explode. Families might even have nine bins in the hall to separate their trash, as they do in Japan, where consumer recycling tops 90%.

As drivers began to switch to 100-mile-per-gallon plug-in hybrid cars (already expected to launch by 2010), the electricity grid could come under strain...

...There'd be other ramifications, too. The federal government's deficit would balloon as it paid for energy incentives and social welfare. We could even see civil unrest as the poor scrambled to survive.

Suburbanites would crowd into urban town houses to avoid costly commutes, and working from home would become common. Eventually, public transportation might even improve...

...Richard Heinberg, a senior fellow at the nonprofit Post Carbon Institute in Sebastopol, Calif., disagrees [that gas prices have topped out for the moment and will stay at this level for the foreseeable future, a some are clainimg]. He believes it could happen within five years (of course, $10 likely would be worth less then).

More than half of the world's oil producers, including the U.S., Britain, Mexico, Venezuela and Russia, are seeing production decline, Heinberg says. Meanwhile, demand is growing at 1.5% to 2% a year. Heinberg says the OPEC countries need their reserves to meet booming demand at home and that at some point, oil will become scarce.

The result: Prices will shoot up.

As a whole, Modern Orthodox and Ultra/Cheredi communities seem to be either unaware of blissfully naive about the economic fallout that peak oil and the demise of globalization are starting to have. But this can't last long - most are already straining under the weight of school tuitions and housing costs (and of those who bought in the last 3-5 years, their negative home equity). We, as a whole, have not been willing to make the changes necessary lifestyle changes and those few of us that have tried to sound the warnings have been giving warnings to deaf ears.

So here we are. The ship is sinking and we're trying to re-arrange the deck chairs.

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