Fasten Your Seat Belts
Oil has been hovering around $80 a barrel for a few months now. Even more surprising than the steady rise in oil prices is how little panic is being voiced over the stratospheric cost of our favorite fossil fuel. People seemed to have used up their capacity for fretting over oil prices last year, when $60 a barrel seemed unimaginable. The Wall Street Journal offers up the “Wal-Mart Effect” to explain our collective shrug over oil prices:
For every extra dollar taken from drivers' pockets at the pump in the form of higher prices in recent years, low-cost exporters from China and elsewhere have put roughly $1.50 back in the form of cheaper retail goods. Even at today's near-record prices, U.S. households today spend less than 4% of their disposable income at the pump, vs. over 6% in 1980.
Like the coupon for 20% off on your next purchase, the Wal-Mart Effect doesn’t actually put money back in our pockets. It relies on the reality that we are manic consumers with holes burned in all of our pockets. Sadly, our consumption-fueled indifference may even buffer us against $100 a barrel oil. Imagine how well insulated we would be if we reexamined our need to consume cheap imported “necessities.” We could even coin a name for this revolutionary theory. How about the “I Already Have Plenty Effect?”
While high oil prices haven’t succeeded in dampening our excessively consumptive behaviors, they are squeezing inefficiency out of a host of personal and commercial technologies. Automobile fuel economy is finally on the rise and, more importantly, industries that rely on oil have no choice but to find innovative ways to conserve. According to the Journal, Union Pacific “has bought more fuel-efficient locomotives and trained engineers to operate trains in ways that conserve fuel.” The company believes that rising oil prices could actually improve the railroad’s competitiveness against trucks in moving freight. This type of innovation is happening across the economy and will produce dividends for years to come.
The race to greater energy efficiency has been aided by the quick collapse of the nascent ethanol industry. Once again, the Journal weighs in on this very predictable outcome:
The price of ethanol has fallen by 30% over the past few months as a glut of the corn-based fuel looms, while the price of ethanol's primary component, corn, had risen. That is squeezing ethanol companies' profits and pushing some ethanol plants to the brink of bankruptcy… The downturn exposes the industry's reliance on political support in Washington, which has offered tax credits to refiners to blend ethanol with gasoline, as well as tariffs on imported ethanol and other measures.
It turns out there are no immediate alternatives to the oil roller coaster. Given last year’s clamoring for government action to save us from expensive oil, our quiet resignation to now go along for the ride is a sign of real progress. Getting sick to our stomachs may be necessary before we decide to change.
Comments
Hi-
Thought you all would enjoy this article from yesterdays New York Times about the ongoing effort of leaders in NYC to making NYC greener.
Posted by: Morris Laniado | October 22, 2007 2:45 PM