by Eric Miller
At least once or twice a week I am in a car traversing the maze of highways around Texas and Fort Worth, and each time I wonder how such a system will be able to sustain itself. The short of the answer is, it won't. Rising oil prices and a decreasing supply will bring many changes to the way we live, the products we consume, and how and how far we travel.
First, the obvious changes. I heard a commentator say that when oil is high, you can't get a hybrid, and when it's low, you can't sell one. Right now oil prices are on the rise, and 2011 will see more hybrid and other fuel-efficient automobile models on showroom floors than ever before. The big auto companies wouldn't be going in this direction if they thought there was an endless supply of fuel in the ground. We will have perhaps more small cars available than at any time since the mid 1970s. These are changes for the good, but the switch from Hummers to Ford Fiestas are miniscule compared to the dramatic changes that could come in the longer term.
The move is already under way from the far suburbs back to close-in suburbs and downtown. We're also scaling down from the monster house and into smaller houses, condos, manufactured homes and apartments. At the same time as cars are becoming smaller and more efficient, this geographic shift will increase demand for public transportation. It's simply because with more people living in higher-density communities, public transit will become more practical and efficient. Higher oil prices will accelerate this trend--but this trend also stands to temper the rise in oil prices.
As retail stores followed the movement of people to the suburbs, so they will follow them back to the city. For evidence, look only to the recent move of retailers like Wal-Mart and Target to open smaller stores in urban stores. What's in those stores is likely to change a bit too.
Not only is China, the country that produces a large portion of the goods sold at these retailers, trying to refocus its economy on high-tech and the like, which means higher wages for Chinese workers (they see the writing on the wall too), but the increasing price of oil, and thus shipping, will mean that it's more efficient to produce goods close to where they are consumed. So, the potential for the return of manufacturing and production to the U.S. could be in the cards. Moreover, as the far out rings of the suburbs become less accessible and less desirable, the value of that land for farming will increase. With high oil prices, shopping local may not be something you have to step out of your way to do; it could be something that everyone will do systemically.
Of course in the short term, pain from high oil prices will come from higher heating and transportation costs, and higher costs of goods at the store. In the long run, though, a return of production to our shores will mean some higher-wage jobs close to home and a better ability to afford higher priced goods.
I'm not sure anyone has a clear idea of how fast these changes will take place. Monetary policy as well as the use of alternative fuels, additional refining capacity and exploration will all come into play. Take for example a new process with promise that seeks to turn plastic back into oil. You can bet there won't be free plastic bags at the grocery store if that happens!
Cheap oil has made the world smaller, or flat, as Tom Friedman calls it. It's brought far away countries and people closer, made travel accessible, sometimes brought about a violent clash of cultures, filled our shelves and lives with cheap consumer goods and enabled us to live in large homes and have big cars to use on our long commute to work and shopping.
In other words we have to sit in traffic to buy a lot of cheap plastic and are able to fly across the globe to eat in the same restaurants we have at home. What's the alternative? Cozier homes, walks to work, fresh produce and good jobs. Worried about high oil prices? Look beyond the pump and you won't fear it for a minute.
