Monday, February 27, 2012

My Summer Forecast

This chart of LA area average gasoline prices over the past 12 months, taken from gasbuddy.com, is one of many pieces of data I've seen suggesting this is going to be a big summer for bikes, and a huge bummer for car culture. In 2011 the highest absolute prices of 2008 were not exceeded, but it was a year marked by the highest annual U.S. expenditure on gasoline ever recorded. Averages remained high throughout the year and the peak in May was the highest since 2008. Prices tend to peak going into summer, but as we can see above, this year we are still in February and have surpassed the peak of 2011, with the usual "peak driving season" still several months away.

Predicting commodity markets, especially commodities dependent on a resource as volatile as oil in recent years, is difficult and prone to error. However it's looking clearer and clearer everyday from the data available that there is a potential for a run up in prices surpassing the 2008 spike.

Now separating the present facts from my own conjecture, it is my own opinion that in 2012 we will see new records set for gasoline prices. Well in fact we already have, since no prior January or February months have been as expensive before, but I think we will see new all time highs and will likely surpass the 2011 record for highest annual spending on gasoline.

This process will likely shake off some people on the edge of affording their commutes, and if we do not adapt to facilitating economic activity with less fuel dependency, this could stop the fledgling economic recovery in it's tracks. A slow down or halt of economic growth, or worse a full on dip back into recession could drive gasoline prices back down, but the new low would likely remain far above the crash in prices in 2009 following the 2008 recession.

If things get really hairy we could see the U.S. and it's allies tap their strategic reserves to buffer the oil market, which happened last year in response to the disruption to oil exports from Libya. However a release just to bring down prices, and not address real supply shortage emergencies, puts us in a more vulnerable position should real shortages occur later.

The U.S. strategic petroleum reserves, the largest stockpile of emergency crude oil controlled by any government, at 727-million-barrels, is when combined with our domestic oil production, only about 2 and half months worth of supply at our normal consumption levels. If we tap the reserves to any significant degree and prices remain fairly elevated from historical averages, refilling them to capacity later will cost a lot more than what we paid to fill them. In any case, we have reserves sufficient to bring down prices in the short term, but doing so can only delay the problem, but not address root causes.

There are fundamental forces at work tightening the oil market with growing demand in the developing world, especially rapid fuel consumption growth in China, growing domestic demand in exporting nations, and stagnating global oil production despite record oil drilling investment. So despite U.S. driving being in decline (see here & here), and production of oil here has getting a little bump from more offshore and shale oil development, growing consumption elsewhere means what America does is no longer driving the market.

I intend to dive a little deeper into the root causes for fuel costs and the global oil market in future posts and another up coming project. But for now I think a key take away here for the bike movement is to realize that auto-centrism is, I believe, going to be knocked up against the ropes more frequently, and with harder blows, as time goes on. We have to be ready to rise up and articulate a new path forward, because if we don't, the crowd that wants to keep the cars all running and gas cheap no matter what, even if their aims are not sustainable, will scream and shout for policy choices that will only make a necessary transition away from oil dependency more painful later.

US Crude Oil Field Production & Net Crude Oil Imports Cumulative Stack ChartUnashamed lairs like Newt Gingrich are already spreading disinformation, claiming we can just tap a few more holes in our country and we'll be well on our way to energy independence with cheap gas brought back like a phoenix. Before you believe any of the hype about America becoming energy independent, check out the chart I made from data provided by the US Energy Information Administration. We have a mountain of oil debt, that is simply not going to be brought down without massive conservation efforts, no matter how much new drilling was opened and natural ecologies ruined to fill our tanks.

When figures like Newt Gingrich claim we can chop fuel prices nearly in half while simultaneously championing suburban auto-centric sprawl and sneering at rail transportation and smart growth development that is pedestrian and bikeable in scale, they are full of BS. He is suggesting we can have our cake and eat it too. We simply cannot.

The summer of 2008, with skyrocketing gasoline prices, was a big shot in the arm for the move toward bikes in Los Angeles. It was also around that time that I was getting even more serious about bikes and riding frequently. In the aftermath of that summer in 08, I finally got rid of my car for good. Bicycling was attracting press in a very different light as motorists were agonizing for high prices (that are some of the lowest in the world by comparison to other nations).

I believe this coming summer can far surpass that growth for bicycling, and we should be ready to promote culture change at a time when much of our culture may be confused and frustrated. We have to counter the liars that would have us stay in denial and have us believing a car dependent mode of living can be sustained.

We must also not back down if a recession or other traumatic event does provide temporary relief in fuel prices. The long term trends that will transpire in the decades ahead demand that we must lesson our economy's dependance on oil now. The longer we put off meaningful action, the harder the future will be, and the greater the risk of suffering more at a later date. We cannot kick the can down the road anymore. If we were smart, we would be taxing fuel heavily like the Europeans do (gasoline is about $9/g in the Netherlands) , to ensure prices are consistently high and thus promoting reduced waste regardless of market swings. Higher fuel taxes would also provide revenue to keep transportation systems funded and maintained, something we now struggle to do in the United States.

Perhaps I am reading too much into the possibility for gas price hysteria and economic fallout this summer, but I think it is better to be prepared for the possibility than to ignore warning signs. 2008 was a dress rehearsal for major gas spikes, and perhaps enough Americans have now learned to make other arrangements in response to price rises. Maybe we can go through a record summer without our economy hitting a wall this time. However car culture is deeply embedded into modern America, and we may still have some ways to go before we're really ready for our new energy reality.

However events play out, I do think this will be an interesting summer to say the least, and one which I think will strengthen the case for bikes and see ridership hitting new highs. A new vision for transportation in Los Angeles is possible, let's make it happen.

CicLAvia  10-9-11

2 comments:

Alex said...

Definitely. As gas prices get higher, I drive less and ride my bike more. It's a folding bike, so it's nice that I can combine my bike commute with public transportation when I need to.

Gary said...

I have been giving some thought to a folding bike myself. It does seem handy for mixing transit and bike, though fortunately in my commuting, just biking is mostly sufficient.