Sunday, May 31, 2009

Oil Prices

Matt Ygliesias paints a somewhat dismal picture of oil prices going up along with the economic recovery, perhaps resulting in another recession. That's quite possible. While the financial industry's misfeasance and malfeasance is at the heart of the global economic meltdown, the rapid escalation of gas prices appears to have triggered the collapse.

The funny thing is, we could make enormous strides with conservation. But as the world economy gears back up, we're going to be back to the situation of consistent annual growth in demand for oil, with new oil resources being more difficult and more expensive to tap. We really do seem to live in a world that will only respond to disaster, and even at that not very well... but one way or another we will be returning to a world where oil costs $100 or more per barrel, and where gas prices again hit $4 or more.

I doubt that the next generation will enjoy anywhere near the same level of mobility as this generation. Oh, sure, if you can afford it, the options will be there. But high fuel prices will price long road trips and air travel beyond the reach of many families who currently take cheap fuel for granted, and we already have a remarkable national amnesia about the months of $4/gallon gas.


  1. That amnesia won't last long . . . the shock of seeing prices at the pump will (in the near future) bring ait all back . . .

    The heck of it is, $4/gallon gas didn't really trigger all that much of a change in behavior . . .


  2. There wasn't much change of behavior up to $4, and there was a lot of commentary along the lines of, "See? Gas prices are no big deal." Then they hit $4, and behaviors unquestionably changed. Take a look at miles driven per person, or gallons of gas sold as compared to the prior year, and you see big changes.

    You're quite correct that, when we go back to $4/gallon gas, all those memories will come flooding back. But between now and then, what will we have done to soften the effect of gas prices on the economy? If the answer is "little to nothing," Yglesias may well prove correct that a strong recovery (and rebound of global consumption of oil consumption) will precipitate a second recession.

    Not that I'm arguing for it, but if you want "market forces" to play a role in preventing a sudden spike in oil prices, a slow recovery may beat a fast one. But I'm not sure what can actually prevent prices from spiking up at the point when it's clear that demand is about to outstrip supply, or that a slow recovery is any more likely than a fast recovery to prevent a spike. The one thing that's inevitable is that we will again reach that point.

  3. "The one thing that's inevitable is that we will again reach that point."

    . . . and it is all but inevitable that we won't do anything about softening the impact of gas prices on the economy until we do . . .



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