Daibutsu, Kamakura

Daibutsu, Kamakura
Daibutsu in Kamakura, June 2010. There were thousands of school kids visiting that day. It was still great fun.

Monday, June 23, 2008

High Gas Prices - A Permanent Shift?

Gas prices in the Unites States and around the world are at record highs. Here in Southern California, the average price for regular gas is around $4.50 per gallon.

Like a lot of things, there are highs and lows. The economy will have good years and bad years, the real estate market will go up and down, everything has a cycle. However, I think the cost of oil and gas is different. I'm not saying that the price of gas will never go down because it eventually will. What I am saying is that the days of cheap gas in the United States are over forever. Booming economies in China, India and elsewhere as well as eventual diminishing oil supplies say so.

Even so, it is truly amazing to hear the Chief Executives of General Motors and Ford state that we are seeing a "permanent" shift away from large vehicles in the United States. Except during a very brief period in the early 70's during the Arab Oil Embargo, big cars in the Unites States has been a fact of life, almost like a Constitutional or God-given right.

It's not entirely a bad thing of course. It is these market driven forces that are finally getting Americans to give up their huge polluting, green house gas producing monsters.

Unfortunately there are still several large nations that are not allowing these market forces to naturally encourage their citizens to buy more fuel efficient vehicles and to conserve. In China, India, Mexico and several other nations, the government subsidizes gas for their citizens. In China and Mexico, they still pay less then $3.00 per gallon of gas, therefore distorting the natural market forces that otherwise would encourage conservation. This has the added effect of driving up worldwide demand for oil even more and causing some of the increase in fuel prices. People who live near the Mexican border in San Diego are increasingly driving across the border for cheap $2.50 per gallon gas. Not exactly encouraging conservation. China is one of the few countries where the sales of large vehicles is actually increasing.

I take the subway to work here in Los Angeles. I can see first hand the effects of the high gas prices. The trains are a lot more crowded.


  1. Hi Jon,
    Great post! Certainly we are living in interesting times.

    Its amazing to see that all the rhetoric about seriously looking for technology solutions and doing our best to reduce output couldn't do what a simple change of price in oil has done. Its fantastic to see more people on trains and (perhaps) an end to large vehicle addiction. Though to be fair oil consumption is not really down, its just more of it is being burned in China and India and less in USA. I think its unfortunate that today Saudi Arabia decided to increase output. Hopefully it won't undo all of this.

    I don't think its fair to say that the ball is now in Mexico, China and India's court. People in USA and Australia still produce a lot more CO2 than they do. And to be fair people in those places (and there are billions of them) simply aspire to live a lifestyle like we already do. We'd better make sure that when they achieve that target we've already moved the goalposts to some kind of sustainable model. The ball is clearly in our court.


  2. I agree. Government subsidies in these huge countries are just one factor but one most people don't know about.

    I read in the news yesterday that politicians want to restrict the traders and speculators because they are blamed for a lot of the price. The politicians claim that they can reduce the cost of gas by half by putting limits on the commodities traders.

    I actually hope they don't and in a way, I kind of wish the cost of gas does not go down much. Eventually the high cost of gas worldwide, including China and India, will reduce consumption and pollution.