Thursday, January 3, 2008

Running on Empty?

Spending several weeks back in one of the sprawl capitals of the nation has reminded me of why I like Washington so much. Of course it wouldn't be entirely fair to overlook the DC area's own moonscape of suburban and exurban development. Still, Atlanta seems a bit on the extreme side of the vinyl and stucco craze.

The Atlanta Journal-Constitution ran quite a bit of material today on oil and its effects on the suburbs and national economy. This coverage comes on the heels of Wednesday's oil prices topping 100 a barrel. While the price of crude dropped back to the double-digits before the close of the markets, $99.62 is not particularly reassuring for those businesses reliant on cheap oil. There is some debate on the cause of this particular spike, but it seems that hitting the triple-digits is indicative of a broader trend which will likely continue to have ramifications throughout American society.

At any rate, the news service MSNBC suggests that the holidays may have increased market volatility, thereby exaggerating oil prices. But there's more to that volatility than a lack of traders on the market floor. The International Herald Tribune reported that two major causes for the early January increase was due to an attack by Nigerian rebels in Port Harcourt and storms in the Gulf of Mexico, but the run up to $100 a barrel is not a recent phenomenon. Of course at the same time, $100 is a shocker. In 2003, oil was under $25 a barrel and even as recently as 1998 traders could buy a barrel for $11. But a decade's worth of change has revealed many differences in the price Americans see at the pump.

The front page of this morning's AJC wonders if the expense of oil is indeed fleeting. Essentially, the main issue with oil prices in the world today are simply economic. While political unrest, terrorism, and hurricanes have helped to drive price increases, more important is the inability of oil companies to keep up with demand. Even aside from the fact that oil supplies are finite, the growth of China and India in particular are tightening supplies. Factoring in the peak of oil supplies--which some argue we have passed and others argue is still decades away--reveals the recipe for skyrocketing oil prices.

The debate about oil even spills onto the opinion pages. One op-ed, by Joel Kotkin, reassures us that America will emerge from these oil shocks just as we did after the 1970s when President Reagan declared it "Morning in America." But there are significant differences between the oil shocks of the Arab Oil Embargo and the persistent oil price highs of the early 2000s. This time, America won't find excess supplies abundant even if a recession reduces oil demand. In the 1970s the oil shortage was a supply-side problem. Today, we face demand-side issues. Now, three decades after America's oil production peaked, the United States consumes 25% of the world's energy, and contains about 5% of the world's population. China's population is 1 billion more than America's, accounting for around 20% of the world population. India, with 17% of the world's population, and the US with just under 5% round out the top three. As China and India continue to industrialize, less and less of the energy pie is up for grabs.

While Mr. Kotkin assures us that there will be a Silicon Valley awaiting us at the end of this recession; I think it's only fair to note that even the computer chip capital of the nation has a light rail system today. It is time for America to face the music. We can no longer afford to live in an auto-dependent society. This is a point argued by Cornell professor Eduardo Penalver in the adjacent column. He opines that high gas prices combined with the collapse of housing market are undermining the basic tenets underlying American suburbanization. Based on cheap oil and an insatiable demand for housing, the American suburb was at the mercy of forces pushing development further and further away from downtown. But oil prices are making clear the relationship between gasoline prices and the cost of living. As a result, houses intown are holding their value better than those on the fringe. As energy costs continue to rise, it is likely that demand for traditional neighborhood development and transit oriented nodes will also increase.

Of course, if this really is the end of cheap oil, America has many issues to deal with; not the least of which, is figuring out how to cope with a culture as dependent on gasoline as it is on water. The last six decades of infrastructure investment has put everything from schools to hospitals beyond the reach of transit and pedestrians.

While no one really knows when the oil will run out, conservation still makes sense. If we have 500 barrels of oil left in the ground we can consume that at 100 barrels per year and run out in 5 years or consume it at a rate of only 50 barrels per year and extend the sunset by five years. We need that time to develop alternatives and to reshape our society. The end of oil is inevitable. Just because we don't know the exact moment of impact, we cannot fall asleep at the wheel. The high oil prices of today are not a disease, but a symptom of a much greater illness--an addiction to oil. Simply put, we are oil junkies, and if we don't get into rehab soon, we will be well over our heads in debt.

Suburbia was for many years the cheapest alternative for many. Now we are entering an era where we will pay dearly for every gallon of gasoline we consume, and that will take its toll on the suburbs as usual. Planners have the unenviable challenge of figuring out how to deal with this structural change. Regardless of our chosen course of action, the sooner we choose the better.

No comments: