What’s it going to be?
| July 16, 2009
Gas at $20 a gallon, or oil at $20 a barrel?
The Internet this morning has pundits prophesying each. Bloomberg says a glut of oil on the world markets is likely to drive prices down to $20 a barrel by year’s end. And Forbes editor Christopher Steiner has just come out with a book that predicts what will happen as gasoline prices rise in $2 increments.
A glut very well may be in the making for the short term, but I found Steiner’s predictions much more interesting. He writes, for example, that at $6 a gallon, air travel will become a luxury and the SUV will be dead. At $8 a gallon, Las Vegas will go bust and all the airlines except Southwest and Jet Blue will be out of business. At $14 a gallon Wal-Mart will collapse as a business model, Main Street stores will revive, the suburbs will emply out, asphalt will become too expensive and all future roadbuilding will be done in concrete.
Given the examples, you get the impression Steiner wants Vegas, Wal-Mart and SUVs to go away, but that doesn’t negate the fact that similar scenarios are coming due. The earth created two trillion barrels of recoverable oil over many millennia. In the last 100 years we’ve used about half of that. And most of that consumption has come in the last 50 years. Just as the coming oil shortage has the potential to destroy the airlines and and Wal Mart, so it may very well decimate the heavy construction industry. It’s time to start looking ahead.