Gas At $100 And Rising – Can US Economy Survive?

By James Donahue

Some musings this week on the EcoGeek web site suggested that the high price of oil – now at $100 a barrel – could mean $4 a gallon gasoline by spring. The writer suggested that prices like that would bring a “significant economic downturn,” especially because of the sub-prime mortgage mess and deflating dollar.

Indeed, the American economy is built on the premise that cheap oil will always be available. The shortsighted folks in charge of the automobile, agricultural, industrial and transportation industries have not been planning ahead for the day when the effect of peak oil demand hits us all square in the pocketbook.

Consequently, most Americans are not driving vehicles that get good gas mileage and they do not have the option of taking a bus, trolley or train to and from their jobs and on shopping excursions.

Bus service has been deteriorating even within recent months for lack of passengers. Railroad companies have been tearing up track and turning the easement rights over to local governments. Trains once visited nearly every town and township in the nation, but not any more. Amtrak, a government subsidized passenger service, is barely holding its own on runs between major metropolitan areas.

Hard hit will be the airline industry, where the cost of jet fuel sets ticket prices. That form of moving may be priced off limits for the average holiday or vacation traveler. In fact, the concept of vacation travel may be in jeopardy altogether.

The farm will also be hit hard. Expect the price of food to skyrocket. Expect people to be making hard choices between the cost of medicine and food. Forget the frills like a new pair of shoes, a new television set, or a summer vacation trip. If it isn’t needed, we won’t buy it.

Indeed the price of everything will be going up. Americans have developed a commercial appetite the feeds on products produced mostly overseas. The cost of shipping these products to local stores could put these goods and services beyond the available reach of the average wage earner.

Can there be light at the end of this tunnel? EcoGeek writes that “Americans have already shown that they will promote, invest in, and adopt new energy-saving technologies when it becomes cost-effective to do so.” Thus, that writer suggests that it may take this kind of shock to rattle our cages and wake us up to the crisis at hand.

And yes, Americans have had a history of rallying to meet the need at the last moment. That we have not planned in advance for a crisis we all knew was coming seems foolhardy. But then, that seems to be the way things get done.

EcoGeek concludes that the high cost of gas this summer “could promote a lot of investment from big business and venture capitalists into gas-saving or alternative technologies. Expect $4 gas to kick cellulosic ethanol investment into high gear, and don't be surprised if electric cars become not only much more newsworthy, but also purchasable as demand for gas continues to outpace supply.”