Revised Prediction for St. Louis Gas Prices
Back on December 30th I predicted that by the end of 2006 “a gallon of regular gas will exceed $3.00, not due to a natural disaster or terrorism.” I think that prediction might turn out to be a major understatement. At the time regular gas in St. Louis was around $2.20/gallon.
Yesterday when I left my house for dinner regular at the two stations near me was $2.69/gallon. Just a couple hours later the price was $2.88/gallon (shameful I didn’t have my camera with me). Today I noticed the price has settled to $2.84/gallon. This is all for regular. Premium fuel, like my former Audi required, is now over $3.00/gallon. Places in metro East are seeing regular in the $2.94 – $2.99/gallon range.
So today I’m revising my estimate, I think we’ll see regular gas at $3.50/gallon before New Year’s Day 2007. And I don’t mean some spike brought on by a hurricane or such. Just normal everyday pricing.
What we must remember that the cost of this increase is not simply what we pay at the pump. While the average driver may be able to pay another $750-$1,000 for gasoline in 2006 than they did in 2005 that aggregate cost will mount. Many will be unable to juggle this increased expense with their incomes. Far suburban areas will continue to find it challenging to attract service workers because it simply will not be cost effective for someone to drive 20 miles for a minimum wage job.
Our entire economy is dependent upon oil, cheap oil.
Employers & employees located nearest to mass transit will be the best off. Ironically, it will be more and more costly to operate our bus system as fuel costs surge. Increased revenues from new riders and rate increases will not keep pace with fuel prices. Meanwhile, our government will likely continue road expansion projects rather than providing efficient mass transit where needed to keep the economy moving.
We may elect more Democrats to Congress in November but I don’t think that will help much, if any. Democrats have controlled the White House & Congress and still failed to do anything about sprawl, dependence on oil and auto fuel standards. Republicans are more cozy with oil interests but Democrats don’t seem willing to make any real change, presumably out of fear of not getting elected.
Locally things will be interesting as fuel prices increase. The City of St. Louis will actually be positioned well to deal with a slowing economy. I hope we can actually utilize some of our industrial buildings to once again manufacture goods to replace those we can no longer cheaply import from China. Our retail storefronts should again begin to open up as locally made goods are sold locally. Local farmers markets will see continued growth as the big grocery chains struggle to stock shelves with reasonably priced merchandise that has to be shipped cross country.
People will naturally gravitate together in the core. Sprawling suburbs with massive McMansions will become liabilities. Owners of those 3 acre lots may have to resort to growing veggies where they have the manicured lawn now.
This is not going to happen overnight but it has already started. The shift is taking place. How quickly the economy changes is hard to say as is how rough it will be.
– Steve
The federal goverment elimnating operating subsdies in 1998 which is contributing to metro big defict next year. Metro has defer some capital improvements to fund transit operations. I hopeing these high gas prices will help metro passed the sales tax increase which is needed badly.
Steve, it appears that you’re being a bit short-sighted. Gas prices reached a zenith in 1979-1980 as you will remember. The nation was panic-stricken at the fuel situation then. I wasn’t old enough to be aware of much at the time, but I imagine there were many people like you who were saying that the death of the auto-centric culture was near.
What happened in the next two decades?
Gas prices plummeted.
Adjusted for inflation, as recently as 1992 we were paying the same amount for gas as in the early ’80’s.
I wouldn’t assume that the trend of rising prices will continue long enough to dismantle the car culture (as you said, such a change won’t happen overnight).
But you might be right on your short term prediction as to price.
[REPLY 6/9 @ 7:35am – I don’t think the US/World are going to go car free. I do think we’ll continue to see a shift toward urban living and fuel prices will help that along.
As for prices dropping, I don’t see it happening. As you pointed out, we were paying more in adjusted dollars 20 years ago than we are today so we kept on building out suburbia and buying tons of SUVs. World demand has continued and now China is smitten with the car. The situation is far different than it was 20 years ago. – SLP]
I agree, but one argument I always hear is that the standard, “one day oil will cost too much and the U.S. won’t be able to finance the lifestyle of the last 50 years anymore. There will be a move back to the central city and more demand for public transit because of it,” could be rendered obsolete by a number of different methods.
First, the one industry gaining major, major traction is ethanol/biodiesel (of which like 5 or 6 major facilities are planned, built, or operating on the riverfront in our fair metropolis right now). Hundreds are in the works nationally. Basically corn or soybean alcohol is a liquid-based fuel that we can pump right into the same cars from the same fueling stations and drive, live, and transport the exact same way we do now. Nothing about that solution changes the way we live. Folks can still live in O’Fallon, St. Peter’s and Wildwood and work in Clayton or downtown, driving 35 or 50 miles every day, each way. And that’s what many states and in some ways the federal government has already incented the private sector to develop. It does seem the “what will replace gasoline” war was fought in the mid-1990’s and mass transit sure didn’t win that. Agri-fuel did.
And I hear the same argument but for hydrogen fuel, propane, natural gas, electricity, or this new buzz one, p-fuel high-efficiency octane.
Basically, anyone who argues: no more cheap oil = no more automobile, doesn’t recognize there are literally dozens of other fossil fuels still out there.
And politically, it’s obvious the vast majority of Americans do not want to change their lifestyles. If the government and market can find a fuel solution that lets them keep their suburbs and sprawl and auto commutes, they’ll re-elect them.
And if you look at the national energy debate, it’s all about one thing and never about another: 1) it’s always framed as “what will replace gasoline,” with no mention of the option to change transit and development patterns, and 2) it is never, never about conservation – it’s about what fuel is out there we can as rapidly consume for a similiar cheap price.
I havent heard of anyone with national clout saying, “maybe we should be less wasteful and conserve more enegry, and part of that solution is changing the way we physically live in a built environment.”
How do you refute this counter-argument? I havent figured out any response because they are probably right. Gasoline is near it’s death, but there are lots of other options that dont include density and mass transit. I would put my money we go with one of those other options before we lay more track or buy more buses.
[REPLY 6/9 @ 7:40am – Yes, we are not going to just give up our cars but I don’t think all these other technologies will just magically slot right into place so the transition is smooth.
People are realizing suburbia is not all it is cracked up to be and rising fuel prices will help a push toward the center. Sixty years ago the push toward the suburbs began slowly and picked up speed as the decades went on. I think we will see a reverse trend with a slow start back to the center currently happening with it picking up speed for various reasons, gas prices among them. – SLP]
Devil,
Not only that, but consider the fact that automobile companies have yet to be forced to come up with a viable alternative to the Gas Powered Automobile. They are far too powerful to let that slide, I think once they sense that people are starting to use their cars less, and buy cheaper more fuel efficient vehicles, they’ll announce the latest technology, of which they’ll have a patent of sorts.
I wish that Steve’s vision would happen…but I just don’t think the majority of americans are that considerate of the rest of the world to give up their personal space/autos.
[REPLY 6/9 @ 7:45am – I think the only way I’d give up my personal auto is if I lived in NYC, otherwise I just can’t imagine. That said, I take my scooter many places and if I lived in an area with places to walk to I would do so.
But driving a smaller car I see that distances seem longer. That is, in a bigger and more luxurious car 20 miles seems shorter than in my efficient Scion. If more of us are driving smaller and more efficient cars like many Europeans do I think that will bode well for more compact development patterns. -SLP]
Gas is still cheap. While I would prefer free gas, I hardly flinch when I fill up my Lincoln or the Eldog. It is worth every penny to roll in luxury. I mean really, it still will be cheaper to drive to Memphis than to fly even in an old V8 500 ci Cadillac with three dollar a gallon gas. I could argue that the creation of a new car takes more energy and resources than my old car, but some may consider that misguided. Or you may consider that mowing your lawn or an old two stroke scooter causes far more enviornmental damage than such a luxury automobile.
I do notice the overall effect. Nearly a third of my staff gets around almost exclusively on their bikes. This shift to self powered transport will have a positive effect on reducing demand and lowering prices. Of course world demand is up, so that is throwing it all off.
So I guess I am suggesting to stop mowing the lawns and start biking. I want cheaper gas and I don’t want to mow my lawn.
[REPLY 6/9 @ 7:50am – You are just one crazy dude! I’ve seen your cars, big classic American gas hogs from the 70s. I’ll agree that producing a new car consumes more energy than your old one uses but car makers like Honda are working on that as well. Japan is implimenting strict rules about life cycle use.
And you are correct, that lawn mower and old 2-stroke scooter create more pollutants than your Mark V. But pullutants are different than energy use and that big Lincoln is really thirsty. – SLP]
Bigger picture . . . the price of gas is going up because of rapidly increasing demand elsewhere in the world, places like India and China, where the peasant class is doing the manufacturing that used to be done here. The growth of their middle class (and their ability to afford an automobile) mirrors the decline of our middle class. Their success also creates the wealth which allows them to “invest in” (as in partially own) American companies and to buy more and more of our burgeoning national debt.
Where does this leave us in the long term? There’s a limit to the number and kinds of “services” we can sell each other, just as there’s a limit to how much stuff we can sell each other, especially if we’re continuing to import ever-increasing amounts of it. As a nation, we seem to be headed down the road of many smaller countries (and some American states), where we’re having to rely on the largesse and the whims of tourists for the fundamentals of our economy. We’re not there yet, but there may come the time where we no longer control our own destiny.
As has been pointed out in other posts, in many ways, all business is local, and its success or failure depends on you. While supporting local businesses may cost a bit more and/or be a bit more of a hassle, the job you save just may very well be your own. As one of my former Denver city council members pointed out, “Halfway through my recent trip to China to promote trade I discovered that my briefcase, was made in China. So was my cell phone, my wallet and my Jerry Garcia tie.”
The price of gas is relative. If you don’t have a (good-paying) job, it hurts a whole lot more to fill up than when you have a big wad of cash in your pocket. And it hurts more here, too, since our lower cost of living makes the cost of gas (and many other items that have the same relative costs across the country, like cars and scooters) relatively more expensive. (If you have to have a higher salary to live on the coasts, you spend a lot more of your paycheck on real estate and a lot less on commodities like vehicles and fuel.)
The oil price increases of the seventies were a result of US Oil production reaching its peak and beginning to decline. As a result, for the first time since the oil age began the US had to depend on foreign sources of oil to fuel its growth. Oil producing nations had leverage against America and used in in 1973 with the oil embargoes, prompted by America’s overt support of Israel. There was no actual shortage of oil available to the world in the 70’s, the Arab countries just refused to sell it to the US. After ’77 OPEC exercised much more control over the indvidual oil producing states and the supply (and therefore price) stabilized.
Oil production in any field or collection of fields proceeds on a curve. As soon as a field reaches peak production, it immediately begins to decline. We have developed lots of technology to combat this, but all that the technology does is delay the inevitable decline of the field. The same pattern applies to oil production in individual countries and the world as a whole.
Unlike the seventies, we are now approaching peak worldwide oil production. Some people put the date of reaching peak ten or twenty years out. Some say it has already happened. It is hard to be certain, as much of the information concerning oil reserves is closely guarded by the countries where the oil sits. Nevertheless, virtually anyone who knows anything about oil production realizes that the peak is approaching if not past already.
At the same time global oil demand is increasing. China and India are quickly increasing their consumption of energy. As demand increases and supply dereases, the price will continue to go up. Unlike the seventies, you will not see sustained low prices for gas ever again unless demand decreases (i.e. we conserve energy).
There are some promissing alternative sources of gas like ethanol and bio-diesel, but they will never replace oil simply because of the scale required to do so. There isn’t enough cropland in America to grow our food and our oil. Plus corn ethanol production is not very efficient. Some even say that the energy return on energy investment from corn ethanol is negative. Ethanol can also be made from waste and we will see more of that as gas prices continue to increase. Bio diesel is also promising (particulkarly algal biodiesel), but again the scale required to replace oil is just not there. This technologies will be seen in the marketplace as they can now compete with oil on price, but they will not replace oil.
People can afford to be flippant about the price of gas now as it is still manageable for many people (certainly not for everyone), but we will see who is laughing when the price continuse to climb. People who take the timme and effort now to organize their lives so that they are ready to deal with high energy prices will have a much easier time in the near-term future than those who cling to their gas guzzling lifestyles and their monster suburban houses.
Are you taking any bets on gas reaching $3.50 per gallon? I might be interested. We are in ‘driving’ season and $2.88 is a ways from $3.50. The US dollar is perked up in the last few days, but I don’t think that will last. The war in Iraq can’t get worse, I hope, but an ‘event’, like Iran going nuclear, would cancel the wager.
As for the people in the McMansions, in the Hummers, those people can afford high energy prices much more than the median income [about $40,000? in the metro area] family, so I cry them no rivers and don’t look to them to change society.
If you think manufacturing is coming back to this area in any significant way, keep dreaming. The jobs will go to Mexico and get railed/boated in. Ocean going freight rates are down significantly from a year ago, so there seems a good chance that the jobs will stay in Asia. Even if they were to come back to this country, manufacturers these days typically, though not always, go to the hard to unionize south.
[REPLY – If I’m wrong on the $3.50 I will admit so here. As for the rich folks in the McMansions and driving the Hummers, I think many of them are financially stretched — living the American dream to the max. They will have the hardest time adjusting to a new economy.
Jobs will be tough but cross country trucking costs will be worse. We may be forced to make things locally or pay a high price to get it from elsewhere. We may also just consume less by say using washable dish towels rather than disposible paper towels. – SLP]
part 2 . . . but because we live in the great midwest, we’re better positioned to compete in a global economy because of our affordable infrastructure costs, relatively shorter commutes and a lower cost of living. It doesn’t make gas any more affordable, but it allows us to keep our jobs . . .
“I don’t think the US/World are going to go car free”
Yeah, that will never happen unless every city has massive public transit projects, and a tax on mileage.
As stated before, the main reason our gas prices are so high is due to China and India, with their 2.5-3 billion residents, many of which are reaching the middle class, and want a car like the West.
China will pay any price for gas to satisfy their increasing demand, and increasing economy. As long as China pays high prices on the market, so will every other country.
Coupled with stability in the Middle East, Africa, as well as the lack of past research into alternative fuels, and the destruction of mass transit in the United States by General Motors, we have a problem that will still be around in 20 years.
I would not rely on ethanol. The best solution for our energy problem is reduction of sprawl, carpooling, smaller engines and smaller cars, and the usage of mass transit. None of these solutions are easy to impliment, but this problem will be around for a while, so individuals should bit the bullet and take action.
2 Grand a year could be better used in a 401k.
“Sixty years ago the push toward the suburbs began slowly and picked up speed as the decades went on.”
Yup you are right, everything is cyclical. The movement during the industrial period from farms and a more spread out living pattern into dense cities. Then, although with some help from big brother, development began to move back out again, spreading closer, finding a happy medium between the rural farms and the dense urban neighborhood. Maybe the next cycle goes dense urban again, but maybe people like the happy medium?
Good,
The higher prices the better. That will make people more serious about public transportation, car pooling and more efficient vehicles.
The higher the prices go the more options we’ll have for non-standard vehicles.
Ethanol cannot meet our demand for energy. The amount of fossil fuels required to produce ethanol is almost equal to the energy produced by the ethanol itself. The push for ethanol is politically motivated, based on the problem of an excess of corn subsidies. We grow much more corn than we could ever eat, and that corn is partially funded by government subsidies. Other countries are using much more efficient crops to produce ethanol, like switchgrass and sugar beets.
I simply don’t understand why the American public refuses to entertain the idea of energy conservation. It’s like we’re ostriches. There will be a paradigm shift in how we obtain and use energy in the next 30 years, guaranteed.
I’m starting to feel like a person should be required to take a class in economics before they are allowed to weigh in on this issue.
Steve you are correct neither the Democrats or the Republicans are the “better choice” for dealing with this issue. Neither side has the political will to seriously address the problem.
However you are incorrect is assessing that the city will be positioned well to deal with an influx of new residence due to fuel costs. The city is still a corrupt entity run by “me first” politicians. The city’s infrastructure is still in poor shape when compared with the inner ring suburbs and some of the denser county entities. And finally, gas price will not be enough to drive people to the city so long as the schools are still run by a self-serving and corrpt union.
As for ethanol, those who gleefully charge that is still costs energy to produce than it yields are simply wrong. This was once true but now is just a myth perpetuated by anti-industrialists who truly do want to see the end of the auto.
However the fact that this country cannot produce enough corn or refine enough ethanol to replace gasoline is true.
This problem is mitigated though by simple economic factors. ETHANOL DOES NOT NEED TO COMPLETELY REPLACE OIL. By even taking a bite out of oil, by making up a significant portion of the total fuel supply (even if still the minority) ethanol use can exert downward pressure on oil prices by reducing demand.
GM and Ford already produce “flex fuel” engines that run on E15 (common gas) or E85 (ethanol based fuel) with no changes to the automobile. For proof just look at Brazil where 90% of new cars have this technology.
We don’t have to get rid of all oil. Just decrease our demand. Doing so will in fact give the United States and economic advantage over countries that fail to make similar adjustments.
so i’ve noticed that you’re a scion owner and a bicycler. well me too and me too!
question: do you have a bike rack you’d recommend for the car? (xA)
[REPLY – I don’t really take my bike on the car, I just opt to ride from home when I do. I’ve had Thule racks on my previous Audi & VW. – SLP]
While many of you are right, of course, about the growing demand for gas in developing countries such as India and China and a resulting increase in consumption, there are many things about gas production that you cannot predict.
To say that you know what will happen with regards to oil production in the next 20 years is to come off as a fool.
Gas prices could well fall again if production rises. If OPEC is weakened or destroyed by the political defeats of the regimes that consitute it, rising production could very well be the case in the next 20 years.
Of course, the middle east could fall into chaos causing a dip in production.
Who knows?
Either way, it’s foolish to think that the car culture is dying even a slow death.
[REPLY – Foolish? Hmmm, I think when major players in the oil & gas industry are saying world production has peaked the only fools are the ones that don’t pay attention.
The auto has lost its appeal. Sure, it is not going away anytime soon but people want more from life than spending it behind the wheel on the highway. We are in the midst of a shift in values. – SLP]
Peak production? My point was that a significant political shift could undo all of the assumptions that peak production numbers are based on.
And far from your characterization of peak production, there is virtually no concensus on this subject in the oil industry and government. Why not? Lack of transparency in oil firms, especially in the middle east and Russia, make it hard to make accurate predicitions about production. You will find some people saying that peak production will come next year, some oil execs say MAYBE 2020, some governments MAYBE 2012. No one knows.
“The auto has lost its appeal.” I seriously doubt that! We may not like sitting in traffic or donating a kidney to fill the tank, but most of us kinda like our own personal cocoon where we can go where we when we want and not arrive all hot and sweaty!
From a complete devil’s advocate position… what if higher gas prices have the opposite effect? Instead of encouraging people to move in to the urban core… more business move out to be closer to their employees, thus we wind up with clusters of corporate towns like Winghaven?
I drove a borrowed Honda Odyssey up to Chicago a year ago, and I’ve taken my xA up there a few times as well.
The trip seemed a whole lot shorter in the xA, and was, in fact, shorter because there was no need to stop for gas!
Another hobgoblin knocked over the head by sound economics.
I love Google…
While political wannabes preach doom and gloom, offering up one uninformed prophecy after another, Google records their kookiness in the great universal cache for all of humanity to see.
Just how much is gas today in St Louis?
Still under $3.00 a gallon…give it another 5 years or so maybe
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