When Gas Hits '$20 Per Gallon'

For Christopher Steiner, Bad News Is Good News

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Given all that's happened since, it's easy to forget how the Gas Price Spike of 2008 shook the economy and everyday life in the U.S.

A refresher:
  • Americans cut back their driving by billions of miles.
  • Convenience stores and casual-dining chains took a hit.
  • SUV plants shut down.
  • Hybrid cars became bestsellers.

Four-dollar gas swiftly made a profound impact. In "$20 Per Gallon: How the Inevitable Rise in the Price of Gasoline Will Change Our Lives for the Better," Christopher Steiner explains why this could be just a teaser of bigger changes to come.

Oil prices are only going to rise, argues Mr. Steiner, who was trained as a civil engineer and is now a reporter for Forbes. The emergence of a global middle class is driving demand for oil even as remaining supply becomes more expensive to extract. And because oil byproducts can be found in household goods ranging from shampoos to toys -- only 40% of the oil we import goes into our fuel tanks -- virtually no aspect of our lives will be untouched by the end of cheap oil.

"Predicting gasoline's price, during the short term, is a game of chance. Long term, however, there is only one sane prediction for gasoline prices: up," Mr. Steiner writes. "Our homes, our cars, our jobs, our vacations -- throughout they will all change, step by step, with the price at the pump."

Mr. Steiner explores these changes with chapters pegged to the price at the pump: $6, $8, $10, etc. (He doesn't make predictions on timing, though he says $10 gas is a "number we almost definitely will see within the next 10 years.")

The future, as he sees it:

  • At $6 per gallon, people will ditch their SUVs, diesel will become more popular, waistlines will shrink as people drive less, and kids' sports leagues will travel less.

  • At $8, a major shakeout will ravage the airline industry. Air travel will be vastly more expensive. As a result, families will be more likely to concentrate in one region, college-bound teenagers will be more likely to stay near home and Las Vegas will shrivel.

  • At $10, electric car sales will be ascendant. Fewer people will fire up snowmobiles and jet skis and motorboats. Plastic shopping bags will disappear and new, organic-based plastics will gain favor.

  • At $12, the exurbs will lose people as driving becomes more expensive and houses become more expensive to cool or heat. Cities, meanwhile, over decades, will "regroup, renew and grow denser" –- and be served by subways.

  • At $14, big-box retailers will find their economics under strain. It will no longer be cheap to ship goods from China. Logistical networks built on cheap gas will be more costly to manage. Domestic manufacturing will enjoy a renaissance. The gross mileage of paved roads will shrink due to the cost of asphalt. And we'll look for non-oil-based materials for carpets and other housing materials.

  • At $16, our food-delivery infrastructure will be transformed: Sushi will be prohibitively expensive in most parts of the country and we'll see a return of locally grown produce.

  • At $18, a high-speed rail network will connect our cities.

  • At $20, our energy infrastructure will be transformed. In Mr. Steiner's words: "Hydro Aperitif, wind appetizer, nuclear entrée -- the rest is garnish."

    As they say on the Sunday talk shows, it remains to be seen whether Mr. Steiner's predictions will come to pass. But some companies are taking the specter of rising fuel prices seriously: The author looks to UPS' electric trucks and Boeing's fuel-efficient, relatively low-maintenance 787 as examples.

    But if Mr. Steiner is on target, it's difficult to see how the incremental impact of rising gas prices -- regardless of whether they hit $20 -- won't affect the products, supply chains and customers of most markets. No doubt, these challenges will prove insurmountable for some. But as Mr. Steiner notes, "giant businesses will rise as entrepreneurs' intrepid minds elegantly solve our society's mounting challenges as gasoline prices inevitably rise."

    You can read excerpts of "$20 Per Gallon" here.

    ~ ~ ~
    James Arndorfer, a former Ad Age reporter, now works for MillerCoors.

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