What if energy costs keep rising?

By Philip Brewer on 9 May 2008 44 comments
Photo: Philip Brewer

I don't know if energy costs will keep rising.  Nobody does.  Even with recent growth in China, India, and elsewhere, the US still consumes 25% of the oil produced world-wide, so a severe recession in the US could easily cut total demand enough to bring the price down.  Recession or not, I think the medium-term trend in energy costs is up.  Just in case I'm right, you ought to have plan for that.

I've written before about planning for expensive fuel.  I emphasized that you should have a contingency plan either to take money from other budget categories to pay for expensive fuel, or else to reduce your fuel use significantly.  That was short-term planning, though.  This time I want to talk about longer-term planning.

Some people still think that the recent surge in oil prices is a temporary aberration, and that oil prices will return to "normal" (whatever that is).  Plenty of people think that recent prices reflect genuine underlying trends--supply restrictions from many sources together with persistently rising demand from all over the world--but that prices will reach a new equilibrium and stabilize.  Some people, though, think that those underlying trends are likely to keep pushing prices up

What's your plan, if that third view is correct?

It's hard to plan in a vacuum, so let's put down some numbers.  The average price of gasoline (unleaded regular) was $2.59 in 2006.  The price yesterday at my local gas station was $3.799.  If prices continue to rise at that rate, we'll see $10 gasoline within 5 years.

I'm not saying that's the most likely scenario--everybody knows the dangers of assuming that recent trends will continue in a straight line--but it seems to me like a perfectly possible scenario.

Most reporting on possible price trends in gasoline has recently accepted the notion that $4 gasoline is a foregone conclusion and is starting to talk about $5 gasoline as a scary boogyman.  I'm urging you to look ahead a bit further.  Gasoline at $5 a gallon is not the scariest boogyman out there.

And remember, if gasoline prices keep going up, other energy costs will be moving up as well.  Diesel, propane, and other fuels that come from crude oil (like heating oil, kerosine and jet fuel), face very similar production constraints and very similar demand situations, so they'll probably move up just about like gasoline.  Electricity and natural gas are different, but high prices for oil will encourage anyone who can to switch to alternatives, so there'll be upward pressure on all all energy costs.  Wind, solar, and biofuels will increase as a fraction of the mix, but I don't expect them to amount to enough to hold down prices.

It's not as hard to adapt to high energy prices as you might think.  Look at western Europe:  Due to high taxes, they've had gasoline prices of $8 to $10 a gallon for some time now.  The result hasn't been as drastic as you might expect.  People still have cars, they're just smaller and more fuel-efficient.  People still drive to work, although few people drive as far as a lot of Americans do and a lot more use mass transit in some form or another.  People walk more and bicycle more, and because more people get about that way, the infrastructure tends to support it better.

That's the outline of a plan for you:  Switch to a more energy-efficient car.  Move closer to work (or find a job closer to home).  If you move, move to a smaller house.  If you don't move, improve your insulation.  Walk more; bicycle more; organize a car pool; figure out how the bus system works in your town.

Make a plan.  You don't have to act on it--even if prices keep rising, they probably won't rise in a straight line like that.  But even a sketch of a plan gives you an outline for some serious thinking:

  • At what fuel price would you switch to driving a smaller, more fuel efficient car?  How much would that car cost?  What would your old car be worth if you tried to sell it then?  On both the buying and selling side, be sure to take into account the price pressures of lots of other people doing the same thing.  (I just saw a story that the resale value of SUVs has already collapsed.) Whatever your plan is, you should have enough cash on hand to put it into effect.
  • How would you heat your home if fuel prices doubled or tripled?  Selling it and moving to a smaller house isn't the sort of thing you can just do--you need enough lead time to identify a new house and to sell your old one (or rent it out).  And, again, you need to have enough cash on hand to put the plan into effect.  If moving isn't the plan, what else would you do?  Turn down the thermostat?  Close off rooms?  Estimate how much fuel you could save and make some notes--that'll be useful information later.
  • If you wanted to use mass transit, do you know how?  Do you know where the bus stop is?  Is it possible to get to the office or to shopping from where you live?  What bus would you take?  Would you have to change buses?  (Ditto for subways, trollies, light rail, or whatever you've got.)
  • Is telecommuting an option for you?  Even if your boss would object, if your job could be done remotely, you ought to include it as a possibility in your plan--bosses who don't like the idea of remote employees might well come around if their only other options are paying big raises or having employees quit because they can't afford to drive to work.  Start figuring out what hardware and software you'd need to telecommute.  Learn how to use it.
  • Is your job at risk?  Or, if you own a business, are its profits at risk?  Rising energy costs would hit everyone across the economy, but some industries (trucking, airlines, aluminum) will be hit much harder than others.  Take a look at your own situation and adjust your plan accordingly.

One more thing to allow for in your plan:  Shortages.  When constituents are faced with high prices, politicians try to "do something."  Most of the things that governments tend to do in those situations (price controls, rationing, laws against hoarding) tend to produce shortages.  The market system is pretty well established in the US, so I expect we'll see high prices rather than long-term or widespread shortages, but your plan ought to allow for the possibility of hearing "No gas today" from time to time.

People are very attached to their big cars and big houses; they're not going to give them up--and I'm not asking them to.  What I'm suggesting is that people think seriously about how they'd adapt to higher energy costs and be prepared with a plan, just in case higher energy costs are what we get.  The last time I wrote here about the possibility that fuel prices might get really high, more than one commenter seemed to think I was talking about a real disaster scenario--going so far as to say, "If things get that bad, a lot of people are going to die!"  I'd like to gently suggest that the adaptations to $10 gasoline are perfectly possible and almost universally non-fatal.  Having a plan will help.

Around the web
Average: 5 (1 vote)
Your rating: None



44 discussions

Add New Comment

This test helps prevent automated spam submissions.
Guest's picture

There's a good documentary out called "Who Killed the Electric Car" The title speaks for itself.

There are plenty of workable solutions to the US's "addiction to oil" but they have not been made available to the average citizen. It's disgusting.

Guest's picture

Cars have played a major role in our current social makeup. Too much of the overall product is undesirable for society as a whole. They are a major polluter of our cities and the world with their larger than needed size and power. Why do consumers who only use their cars a few hours per week need 'luxury' transportation anyway? Persuasion.

On TV during the previous oil crisis a spokesperson from the Automobile Association was defending why they aren't marketing more smaller cars. "People couldn't just sell their cars and buy smaller ones." The TV commercial which immediately followed the newsbyte was for a flashy full size SUV.

Philip Brewer's picture

@ Ritab and Grampa Ken:

On the topic of cars in particular, I wrote a post a while back called Better cars are not the answer, which is on-topic to your comments.

Guest's picture

Thank you for putting things in perspective, and giving us a heads up on critical issues like this. We do pay less for gas than Europeans and their adjustments will be used by smart people here. We have to accept the reality - and do what we can -when there is nothing to be done. To badly paraphrase the Police, 'when the world is coming down, you make the best of what's still around'.

I feel schaudenfraude (sp) for people selling SUVs. The ones I know are very arrogant, mean people.

Guest's picture

Some of the points are good, but I get very frustrated when I see "get a job closer to where you work." It's never that easy, especially during a time when businesses are laying off thousands of people every month.

Philip Brewer's picture

@ Ronni:

I know exactly what you mean--it's easier to say "find a job closer to home" than it is to do.  But looking out five years, which is what this post is about, there's enough lead time to make that sort of change, if you plan for it.  Even pretty major changes, such as going back to college to get a degree, can be squeezed into five years.

Guest's picture

I'm with you -- I don't see a Mad Max apocalypse looming, but I do think people will need to adjust their lifestyles to factor in energy costs.

It's understandable that a lot of consumers made capital purchases based on cheap energy. A large house far outside a city is a good value in a dollars/sqft sense when commuting costs are insignificant. And a large SUV is cheap in a dollar/(lb of vehicle) sense, too, when fuel is the least expensive part of owning a car. People just have to get used to the idea that energy costs something and needs to be factored in.

There was a time when a middle class person could buy a home in New York City. That time is long gone; people expect that if you live in NYC you will rent unless you are very wealthy. Southern California is heading this way. People accepted that a small apartment was part of the proposition of living in NYC, and life went on. Extra space in cars and homes will become an increasingly expensive luxury, and consumers will need to adapt.

Philip Brewer's picture

@ Kevin:

Yep--entirely understandable.  With some insight into the situation, though, it's now possible to turn the logic around.  The most reasonable thing to do now is to invest capital in future energy savings.  If (as I suspect) the current energy prices will look cheap five years from now, this is a great time to use our still-cheap energy to make permanent reduction in future energy use.  I talked about that in a post called Fix energy in tangible form.  (One of my less appreciated posts.  Not a catchy title, I guess.)

Guest's picture

Philip, this is a great post in that it gets people thinking long-term. By providing some actual questions people might want to consider, you help convey the reality of the situation.

My question is this though: If it's a wise decision to buy a smaller, more fuel-efficient car, then how much of that gas savings is offset at the price of paying off a new (or used) car? For example, I drive an '02 Civic that's been paid off for over a year now. I'm fortunate that it gets good gas mileage, but even if it didn't, I wouldn't necessarily want to take on new car payments just because I wouldn't have to fill up the tank as much. Does that make sense?

Same goes with trying to move closer to work. Maybe the commute would be shorter, and travel options other than driving are viable, but would it be worth it if your mortgage or rent payments went up?

I guess what I'm trying to get at is the long-term cost trade-off. Less gas, new car payment. Less gas with shorter travel time, but more expensive mortgage payments.

Philip Brewer's picture

@ Barbara:

You're exactly right.  Doing the analysis correctly involves calculating the net present value of the cost savings of each of the future fill-ups, and comparing that sum to the net capital investment of the new car (including financing costs).

My main point is that the simple-minded analysis assumes that gas prices going forward will be similar to gas prices today, whereas I think gas prices in the future will probably be quite a bit higher.  That changes the break-even point for investing a new car, but it doesn't change the nature of the calculation.

It depends a great deal, of course, on how long your car is going to last.  My wife's Honda Civic has lasted 18 years--I hope you have similarly good luck with yours!

Guest's picture

It is up to each person to decide how to adapt to economic reality.

Guest's picture

There are whole business strategies in the United States and in the global economy that are based on cheap energy. By removing that as a constant element we are bound to see some significantly destabilizing effects on economic structure in relation to the status quo.

One case would be big box stores, which require very long supply lines, just-in-time supply lines fed by diesel trucks, and personal commuting to the big box stores to enable the mass consumption that sustains that particular business model.

Another case would be the way we presently do agriculture, which requires large fossil fuel inputs like fertilizers, pesticides, processing, packaging, and in many instances, long distance transportation of the final products. Like you said, we're already seeing pressure on any markets that are vaguely connected to petroleum. Biofuels are implicated in price increases in food and if plug in hybrids take off... there could be significant impact on the price of electricity if it's not done right.

There are many personal decisions one can make to reduce one's carbon footprint/exposure to rising energy prices: live closer to the city in denser housing - less energy per unit is used for heating and cooling and it is easier to access local goods and services and employment opportunities without a car.

There needs to be more action from the Federal government to make energy smart decisions like these more feasible for larger parts of the population. More funds for mass transit construction would be good, and incentives for investing in central cities and inner ring suburbs would be great too.

Guest's picture

Nice Job, Phil, mixing the Macro and Micro but one question. Just where the heck did you find that picture and that Speedway gas station with prices that &%$@! low?! LOL:) You know what the *&&%$@!#$ I would do to pay $2.86 for gas?! This is a personal finance site so I can't tell you lest I incriminate myself. LOL:) Where I live, regular, yes I said regular unleaded is just under 4 Samolians! And that's on a good day. What's sad is nobody is going to stop consuming, especially not Gas. We never think about it but we're building towers in Dubai with what we're doing. After all, even when economies are down someone is always making money can you say GULF STATES, and I ain't talkin' Alabama and Wezzyana either.

Philip Brewer's picture

@ Guest:

If you point your mouse at the picture, your browser will probably show you the caption for it:  "Last Year's Gas Prices."

I took the photo to illustrate an earlier post on a related topic.  I thought about going out to get a fresh photo, but that station (which is within walking distance of my apartment) just changed hands and is in the middle of changing their sign, so it's all confused-looking just now.

Then, once I thought about it, I decided that having last year's prices up kind of helped make my point.  So I went with the old picture.

Guest's picture

I actually was already considering this recently, and dropped the money on a nice new bike last night. I decided biking was a change I needed to make for myself NOW so I can get used to it WHEN what you've outlined has happened. I guess I'm a pessimist, but I prefer to think of it as forward thinking.

Guest's picture

What makes the gas costs and transportation considerations sting all the more is that my workplace is moving to the 'burbs from the city.

A 20 minute bus commute is turned into over an hour since I will have to transfer--OR--I could walk 9 blocks (not a good plan when winter hits Syracuse!) to get on a direct bus. The worst part is- work is moving only 4 miles away from my home- but out of the city. Same distance but less "efficient."

All the other co-workers are so excited about having free parking in the new place versus having to pay for downtown parking. Most of them are ADDING distance to their commute, but they are only looking at the short term savings.

It just drives me crazy to see so many people (1000+) drive their cars to have them sit all day. Such a waste. And I certainly would not leave my stay at home hubby without the car- she needs it for the 4 kidlets and running our home. I don't need it to sit in the parking lot while I sit in a cubicle!

I am the only person looking to carpool (I finally found a prospect!). Is that a sad commentary or what?

Philip Brewer's picture

You bet--I also bicycle for transportation.  In fact, Frugal transport--bicycling was the second post I wrote for Wise Bread.

It's possible that sailing ships or canal barges are more efficient than bicycles, but it's a near thing--and nothing else even comes close.

Philip Brewer's picture

@ DivaJean:

I know exactly how you feel.  We Americans are completely unaware of how wealthy we are--wealthy enough to spend multiple tens of thousands of dollars on a car that sits idle in a garage for 10 hours a day, only to sit idle in a parking lot for 8 more!

Higher fuel prices are going to cause major problems, and I'm really not looking forward to it.  And yet, certain little annoyances like those that you point out, are actually going to get better.  I don't know what gas price will get Americans to carpool--I doubt if $4 will do it, but maybe $8 will.

Having a bit of sanity creep in--smaller cars, better mass transit, less space devoted to parking lots, fewer acres going to new exurb housing developments--won't make up for the pain, but at least in my imagination, there's a little satisfaction there.

Guest's picture

I feel bad for the people these high prices are hurting, but in a way I'm glad the price is going up. It gives people the motivation to find other ways of living, more sustainable ones. I think gas prices are going up slowly enough that it's not too difficult on people, but quickly enough that it's drawing really very necessary attention to fuel efficiency and fuel dependence. It's making a lot of people realize that using less fuel is easier than they'd thought. And I bet it's making a lot of people demand better public transportation options.

Whether gas prices go up or down or stay the same over the long term relative to the prices of other things, I hope they stay "high" for at least another few years, preferably much longer. We will be happier people if we get more exercise, have shorter commutes, and live in less polluted environments. If $10/gallon gas is what it takes to accomplish that, I'm all for it.

Guest's picture

About 18 months ago (when Oil was below $90.00) I was reading a article in which an economist was saying that if crude oil prices ever got above $125 (and stayed there) that his opinion was that would be the "witching point" where the economy would contract to a point in which it could not recover... It was his contention that consumers would no longer have any discresionary income...that wages could not rise far enough or fast enough to keep up with the resulting inflationary pressures resulting from $4-5 gas

It's great to talk about how increased energy prices are going to change the "American Consumer" but I don't think many of you realize how the economy will "implode" before we can get to a "Non-Consumption/Non-Consumer" generated economy (if ever..we have no real manufacturing base to replace our Consumer generated economy...it's all been exported)

The Good News is that the Federal Reserve may finally raise interest rates....because most if not all of the problems that we are having can be traced back to the falling value of the Dollar (even the problems caused by Speculation in Crude Oil Futures)

Of course, I'll believe that when I see it.

"Fasten your seat belts...it's going to be a bumpy flight!"

Guest's picture

I know "peak oil" has become a buzzword, but because of it, oil prices can't come "back to normal." If you're interested, check out TOD (http://www.theoildrum.com/). They have plenty of the information necessary to come to that conclusion yourself on their site and seem to be pretty down to earth.

Also, check out Hubbard's Peak by Kenneth S. Deffeyes for the basic science behind the idea of peak oil. It's a fun and quick read, and takes you through the essential arguments and calculations that geologists do in the oil biz.

Philip Brewer's picture

I'm actually a long-time reader of TOD.  (I'm pbrewer over there, although I haven't posted many comments since I started posting here.)  And I've read both of Deffeyes's books.

I don't doubt that the peak oil analysis is generally true.  I do tend to quibble with some of the folks over there who seem to think that prices can only move in one direction.  Whenever fuel costs get painfully high, people will make the sort of changes that I'm talking about above.  Once a critical mass of people do so, the result is a long-term shift in the demand for oil.  Each of those shifts is likely to produce a drop in price.  It'll be a temporary drop, because the quantity of oil produced will decline over time, meaning that the price will rise again eventually.  But the price decline won't be immediately reversed, because structural changes like moving closer to work or buying a smaller car won't be immediately reversed just because energy costs come back down for a bit.

Philip Brewer's picture

@ TheDepressingTruth:

As I tried to say with the bit about European reactions to high energy costs, I don't think high oil prices will produce a catastrophe.  On the other hand, the economy faces many problems just now besides high oil prices.  As you point out, inflation and the collapsing value of the dollar (both the same thing, of course) are as big a problem as high oil prices.  I think the high levels of debt in the economy are going to be as big a drag as high oil prices as well.

I don't think there's a magic number where things suddenly get much worse.  But there are plenty of problems out there adding to our economic troubles.

Guest's picture

On the topic of home heating, I just replaced my propane furnace with the Affinity 8T heat pump from York. The $6000 project should pay for itself within 2 years by saving on energy costs at today's prices.

My house is only a year old and I spent over $4000 for propane heat in Virginia(2800 square feet). I talked to many people who have propane, electric or both, and I realized that those of us with propane spend a lot more. Even people that have a dual fuel system (electric + propane) spend way more than an all electric system.

Guest's picture

what about those of us for whom all of your suggestions are not an option-we already drive small cars,we already live in a small house,but my husband has an 18 mile drive to work every day and moving closer is not an option with the housing market the way it is plus who can say if the job will be there is 6 months, we have a Propane furnace and a wood furnace-guess which one we use? Burning wood is not environmentally friendly but the wood is free for us.
The nearest grocery store is 3 miles away on a major highway-biking is not an option,the school is 8 miles away,the post office and bank are 5 miles away. I work from home which is great but I still need to go to the post office for shipping at least twice a week so i consolidate all of my errands into that time. If gas prices go over $5 it will then take over 25% of our after tax(and health insurance) income to pay for it. My income depends on people having disposable income-money to spend on hobbies-so of course if gas prices continue to rise it will spell DOOM for my business. It is a can't win situation for many small town/rural Americans.
Washington is clueless.

Philip Brewer's picture

High oil prices are going to mean tough times for everyone--and for poorer and more rural folks especially.

There's a certain category of people who dream of rural self-sufficiency, but that's a very hard life.  Rural living without self-sufficiency, though, depends on having some sort of transportation infrastructure.  These past 70 years, it's been provided by cheap fuel.  For a generation or two before that, it was provided by light rail--small communities sprang up around each rail stop, and workers could take the train to jobs in town. Without that infrastructure, though, rural living may simple become untenable, except for people willing and able to be largely self-sufficient on their own land.

I would suggest giving bicycling a second look.  Maybe there's a way to reach the grocery store without going on the highway, if you go the long way around on back roads?  Even if the trip is two or three times as long, that's still a reasonable bike ride for grocery shopping.

Beyond that, I don't know enough about your situation to offer much in the way of specific advice.   My general advice, though, is the main message of my post:  Make a plan.  There may be no short-term solution to your problems, but there are any number of long-term solutions--change jobs, change careers, move to another part of the country, become self-sufficient on your own land....  Maybe with some serious thought, a willingness to embrace change, and enough lead time you'll find your way to a solution.

Guest's picture

Thanks for the head start on the problem that our government doesn't talk about. Back in the '70's the media and the federal governemnt were leading the way to conservation of energy, with car pooling, 55 mph speed limits, and energy efficient appliances etc. Sad that so little of this is in the public view these days.

Am hoping that the Fed, the SEC and the commodity exhanges will crack down on the rampant speculation in the energy and commodity markets. The leveraged trading in hedge funds and futures and collusion among the major suppliers to restrict suppies (and production) is driving the entire Commodity Markets triple digit inflation already... Oil, grains, metals and more.

Thaks for the "seed" thinking about coping. All good ideas, and a good discussion.

Guest's picture

for those as can neither afford to move nor give up the car - fruitless.

yes, we have trimmed the fat from the budget & become frugal; however, living out here in the Valley, just up & moving or switching cars or jobs is not practical; particularly in the current economy.

as for the endless comparisons to Europe - enough please. They are smaller geographically than the US. They grew with an eye towards closeness that allows for their public transit etc. We/USA did not. Particularly, the South & West. Also, if everyone moves to the condensed cities - who will handle the necessary tasks of food production?

Guest's picture

I agree with the commenter above--Europe is a very different situation. I used to live in Italy and France. Although we had a car, it was not really necessary because we could go anywhere on trains and buses, plus occasional bicycles. Distances were short because those towns were built when there were no motorized vehicles and the countries are the size of states in the US. Gasoline was very expensive, but it didn't matter much, as we only used the car on some vacations. The metro area where I live now is the size of New Jersey, and commutes are long for most people. It's a gazillion degrees in the shade for at least five months out of the year, and people don't ride bicycles for fear of falling on the pavement and frying to death ;-) The same problem presents itself when waiting for the infrequent buses. Better mass transit is the answer, of course, but as of yet there is very little push toward increasing the amount available.
I wonder what is going to happen in 10 years or so, when all those now 62-year old baby boomers find that their reflexes and eyesight just aren't what they used to be and they become a real danger on the freeways, whether gas is $10 or $2?

Guest's picture

So what is stopping you from buying a fleet of buses and hiring workers to provide mass transit?

Guest's picture

As long as our govt keeps printing out dollars that it borrows it's that dollar's value dropping... THAT is the problem, it's not the price going up, it's the dollar value dropping hence the need for more dollars to buy that same gallon of gas, or food, or whatever... Govt's runaway spending IS the problem, if that is curbed then the dollar gains and then it will take fewer dollars to buy consumer goods, energy, etc... Duhhhh... I read on the net the other day some financial guru applauding and thankful the dollar was so weak that certain products were more affordable now, what an idiot.. I'm sure he had foreign currencies stocked away in the Caymans...

Philip Brewer's picture

I think it rather misses the point to suggest that Europe can't be a model for the US, simply because their infrastructure--roadways, railways, structure of the cities--is more suitable for walking and using mass transit.  Those structures didn't just spring up there; people built them. 

People built the infrastructure in the US as well.  Most of it was built when oil was cheap, so there was public preasure to build for cars.  It's sad that we're starting where we are.  If we'd started building walkable communities and rebuilding our rail systems back in the 1970s (after the first energy crisis showed us how vulnerable we were), we'd be in pretty good shape by now.

Starting from here, it's going to take a long time and a lot of money to get something that's really satisfactory.  Very possibly more time and money than we've got.

That's why it's important that individuals make their own plans.  You have to start from where you are, and it may be that none of the choices may look particularly good.  But that's no reason to throw up your hands and say that it's hopeless.  If you do that, you'll most likely find yourself in just the same position five years from now. You'd likely have more company in adjusting to high energy costs then than you will now, but I doubt if that'll make the adjusting easier.

Guest's picture

People built the infrastructure in response to high gas prices.

The same will happen here; high gas prices creates too many incentives to keep such a thing from happening.

Guest's picture

People need to start factoring higher gas prices for the forseeable future and budgeting for $5 gas for example. I had a recent on this topic and $5 gas can make a $600+ difference to your budget.

Philip Brewer's picture

Some of the European infrastructure was built in response to energy prices that were high due to high taxes.  A lot, though--especially the layout of the cities--was built long ago, before energy got cheap in the first place.

That's true to a lesser extent in the US as well.  Where I live, it used to be possible to live in any of several of the outlying towns and work in Champaign or Urbana, without needing to own a car, because there was light rail to transport commuters.  In the US, though, most of that infrastructure was ripped up long ago.

I understand that your suggestion that ordinary folks start their own mass transit business is a rhetorical device, but there are actually a lot of reasons why that's not practical.  The fundamental one is simply that most people are not entrepreneurially inclined.  However, there are a bunch of structural problems, having to do with the huge subsidies that the government provides for car-based transportation, that make it impossible for anyone else to compete.  (For example, in many places zoning codes require workplaces and apartment buildings to provide ample parking, so workers and residents aren't able to freely choose to take mass transit from a cheaper place to live to a higher-paying place to work.)

Guest's picture

Now I'm no expert in energy but I reckon there's a pretty good chance energy costs will continue to rise. Fossil fuel reserves are limited and causing continual tension across the globe . . . demand is high and it's not gonna reduce any time soon . . . so costs should move accordingly. Likewise - renewable sources will require massive capital investments to bring fully to market . . . which is not going to make for 'cheap' energy any time soon.

I'm in the UK and my family have made these changes already:

1 - All utilities are metered so we know exactly what we're using
2 - All lights / appliances are switched off until needed
3 - Car use kept to a minimum (I commute via train & walk 6 miles a day)

Planned for future:

1 - Wind turbine
2 - Solar panels

Guest's picture

Gas is only worth what people are willing to pay for it. The market will not hold $10/gallon gas. $5 or $6 at most. There are plenty of inventions out there to increase gas milage but what benefit does the government have to give that kind of milage. Think of how many tax dollars the gov gets every time you fill up. We have the technology government just needs the money.

Also i saw comments about "who killed the electric car" The united states doesn't have the power base to support an electric car economy. A hydrogen economy isn't even possible yet due to the power necessary to seperate Hydrogen from water if done on a mass scale from home.

Philip Brewer's picture


You're right that gas is only worth what people will pay for it, but I think you're mistaken in thinking that people won't pay $10 if that's what it costs. 

Of course, very poor people will be forced out of the market altogether, and people with just a little more money will be hard pressed to make ends meet.  But most people will just grumble and then make a few small adaptations, such as combining trips.

As I said, there are parts of Europe where gasoline already costs $10 a gallon, and it certainly hasn't put a stop to driving.

I don't think the federal tax on fuel (18.4 cents a gallon) provides any great incentive for the government to suppress technological improvements to fuel efficiency.  In fact, I doubt if there are any magic bullets out there for greater fuel efficiency.  Rather, it's easy to improve fuel efficiency, by making the cars smaller and lighter and giving them smaller engines.  There are such cars on the market.  They hadn't been selling very well, until quite recently.  In general, I think people will switch to such cars only when they simply can't afford to drive bigger cars.  Part of the purpose of my post is to suggest that people make any such change as part of an overall plan.

Guest's picture

I have a small SUV that I'm still paying for. Selling it and getting something smaller/more fuel efficient isn't an option for me anytime soon. I curtailed my driving habits before gas even hit $3. I live 30miles from work in a rural area. There is no public transportation available. ride sharing isn't an option because my co-workers are spread out over a large area, nowhere close to me. There are no equal paying jobs closer to home and telecommuting isn't an option.

I really want to be part of the solution but none of the solutions every screams about are possible.

With the technology that we have at our fingertips today, when is someone going to come up with an economic and viable way to convert a persons current gas vehicle to be part hybrid or electric.

Is that really too far out there?

Philip Brewer's picture

I doubt if "hybridization" kits for gasoline vehicles will become common.  The size of the change (removing engine, then adding batteries, generator, smaller engine, and electric motor) is big enough that such a conversion would run to a large fraction of the price of a small car, even before you added in labor.  Maybe if there were just one kind of SUV, so someone could mass-produce one kit that everyone could use--but there isn't.

Being "part of the solution" is a noble ambition, but a bit beyond the scope of my article here.  All I was trying to say was "Make a plan."  Does your current lifestyle work if gas goes to $5 or $10 a gallon?  If not, what changes would make it work?

Lots of things that look impossible when gasoline is cheap suddenly become possible if gasoline is expensive.  For example, right now you'd only be interested in carpooling with co-workers.  If gas gets enough more expensive, maybe some of your neighbors would become interested in a carpool that goes only as far as a bus stop on the edge of town, from which you could all get to your jobs by bus.

Guest's picture

It is doubtless the case that we will see more use of mass transit as gasoline gets even more expensive. But, hello, let's remember that mass transit costs the user money, and that costs of mass transit are going up too (pushed by energy costs, the costs of servicing debt on the enormous investments necessary to start & run a system, etc.). Last night I paid $10.75 to ride a rush-hour commuter train 30 miles. (Yes, there are cheaper times of day, and monthly and weekly tickets are cheaper per ride.) Today, the paper reports that American Airlines is going to charge economy passengers $15 to check a bag (not the second or third bag, any bag). So it's not as if giving up cars is going to get us completely out of the woods.

BTW, I am a big fan of power strips (surge protectors). Plug computer, TV, printer, fax, & perhaps your 2d or 3d phone into one, hit the off switch when you leave the house (or sleep), and watch your power bill go down.

Guest's picture
Pam munro

I live in the old neighborhood of Hollywood, CA - so I am near the old transportation hub left over from the days of the red cars (altho it's now buses and the subway) - I have used those in an emergency - but Once again, I have heard the tales of a friend who decided to green it and ditch the car & they are not pretty. One positive thing is that public transportation is slowly getting more respectable here - for the longest time only the poorest were on the bus - and many of them have, well ISSUES.

Philip Brewer's picture

It's certainly true that the common perception of mass transit riders is that they're all people who, for some reason, can't drive:  people too poor to own a car, people too severely disabled by physical or mental problems to operate one, people with drug or alcohol problems that have cost them their drivers license, the young, and the very old.  And you certainly see people like that, if you ride mass transit. 

Where I live, though, there are a lot of other people:  people trying to reduce their impact on the environment, people who can make more profitable use of their commuting time if they don't need to spend it controlling a car, people who find it more convenient to be at their destination without a car to be parked and attended to.

I expect we'll see the trend continue, with more and more people choosing to ride mass transit just because it's cheap and convenient, rather than because they have no choice.  And, as more such people do make use of the systems, there will be more voter pressure to improve them.

Guest's picture

It has been a stressful week for the consumers of UK energy due to the rising wholesale price of both gas and electricity.  On Thursday, Aug. 21st, two of the “Big 6” energy suppliers announced consumer price hikes for monthly energy bills. The rising cost of energy brings into question how households are going to cope now that inflation in the UK is nearing 5% across the board. 

The rising bills have also begun to hamper the Bank of England’s efforts to control this inflation, leaving the cost of living at nearly double the official target. E.ON announced a 26% increase in the price of gas as well as a 16% increase in the price of electricity, both effective August 22nd.  Following suit was SSE, Scottish & Southern Energy, who announced a 19.2% increase in the price of electricity and a 29.2% increase in the price of gas to take effect August 25th.  SSE is the #2 supplier of energy in the UK, with their 8.8 million customers seeing an average rise of £253, averaging £1259 per year with the current rate increase. 

Both E.ON and SSE blame the staggering price swell by the rise of wholesale energy prices, which have experienced a 50% increase in the price of gas and 60% increase in the price of electricity between February and July 2008.  According to E.ON’s managing director of retail the astounding increase in the price consumers will be paying, “was not an easy decision to make and we’ve tried to keep these increases as low as possible while protecting as many customers as we can.” 

The drastic price inflation of the cost of energy is the result of a decrease in overall supply.  A leak in a North Sea located pipeline linking Norway’s Kvitebjoern field to an onshore processing plant, caused the pipeline to be shut for repairs.  Norway’s oil/gas producer Statoli Hydro stated the pipeline might remain shut until early spring.  This devastating supply decrease coupled with the UK’s lack of gas storage makes consumers that much more vulnerable to price fluctuations.   In addition, the widespread opinion that hydrocarbons, such as gas, are a scarce resource has fostered more intense competition for supplies worldwide. 

The change in prices announced by E.ON and SSE was preceded by the record breaking 35% increases to the price of gas announced by British Gas just last month.  Similarly, energy provider EDF, upped prices by 22% for gas and 17% for electric.  With these increases last month, and the recent price hikes of E.ON and SSE, there are only two energy providers remaining who have yet to announce any alterations to consumer prices.  However, the general consensus is that Scottish Power and Npower will soon follow suit.  SSE’s Energy Supply Director, Alistair Phillips-Davies commented, “The world is experiencing an energy shock of a kind not seen since the early 1970’s, but which is likely to have more profound and lasting consequences."

With nearly 19% of UK households likely to be considered in fuel poverty this winter, consumers are left to make difficult decisions of what to do to decrease energy usage.  Fuel poverty is defined as a household spending more than 10% of disposable income on fuel bills.  Many of the energy suppliers have offered products at fixed or capped rate tariffs in the past.  E.ON is the only company still offering its product at the old fixed rate.  Price Protection 2009 will cost consumers approximately £1102.39 yearly, compared with the  £1259 per year average.  Alternatively, British Gas’ newly announced competitive fixed deal will guarantee stable prices through 2011, and will cost UK customers roughly £1240.19 per year. 

Although British Gas’ fixed price plan is more expensive than E.ON’s current Price Protection 2009, consumers will be able to count on stable prices for the next 2 years.  When deciding which direction to take, UK customers must decide what is a better option for them: gamble that the prices will not continue to rise in order to save money right now, or spend the additional income now in order to save on future price fluctuations.  Arguments can be made for each eventuality, however the only right answer is the decision that you, the consumer, feel most comfortable with.  Regardless of the decision made, it is definitely worth researching any and all possible energy plans, as well as finding ways to reduce the amount of energy consumed.  Here are some tips on saving energy in order to help curb the affect these aggressive increases in energy will have on your household.

    * Adjust your thermostat.   The Energy Saving Trust states, decreasing the temperature setting by 1°C could yield a reduction of 10% on your heating bills.     

    * Use energy efficient light bulbs.  The life of these light bulbs is around ten times longer than ordinary bulbs and can result in savings of £40 over the lifetime of the bulb.     

    * Fix leaking taps - a dripping hot water tap could waste enough energy in a week to fill half a bath so make sure it's turned off.  

    * Conserve by boiling only as much water as you need.   

    * Always turn lights off when leaving a room.

    * Turn appliances off rather than leaving on standby.  Also, do not leave electrical items to charge unnecessarily.   

    * Consider investing in a lagging jacket for hot water pipes and insulate pipes - this could pay for itself within a few months.

    * Defrost freezers regularly and don't leave the fridge door open longer than necessary to ensure it runs efficiently.      

    * Consider investing in loft insulation as 25% of heat lost in a home disappears through lofts without it.   

    * Close curtains to stop heat from escaping.