Sunday, May 25, 2008

If $4 Gas Is Bad, Just Wait

I remember my manager telling me that "junior" developers like me can't be working from home because it sends the wrong message. I pointed him to the employee handbook, and though this is all water under the bridge now, I think it is time that he wake up and smell the coffee. If predictions for gas prices are correct, gas is going to cost anywhere between $5 and $7 a gallon in the not so distant future, and commuters are going to rethink how often they drive in to work. Let's face it, the public transport infrastructure is abysmal in many US cities. Among the cities that do have some form of public transportation, the routes are inefficient, the fleet has aged, and local governments claim to have bigger fish to fry than fix public transport. Here is an excerpt from the article on Marketwatch:
If oil hits $200 a barrel, which is the upper end of Goldman Sach's prediction for prices over the next six months to two years, the gasoline picture changes quite dramatically. At $200 a barrel, crude alone would cost $4.76 a gallon. Add on the costs of refining and distributing as well as taxes, and pump prices could rise to a range of $6 to $7 a gallon.

U.S. drivers haven't radically changed their behavior, and it is unclear at what price it becomes unprofitable for Americans to go about their usual day-to-day activities, said Eric DeGesero, executive vice president of the Fuel Merchants Association of New Jersey.
'Maybe at $6 or $7 a gallon, it becomes less attractive to go to work,' Mr. DeGesero said. 'We haven't hit that point yet, but we might soon.'
Retail gasoline prices have topped $4 a gallon in Alaska, California, Connecticut, Illinois and New York ahead of the Memorial Day holiday weekend, according to the AAA Daily Fuel Gauge Report. Nationwide, gasoline averages $3.831 a gallon.
The uptick in gas prices might serve as the catalyst for change in the mindset of both the car purchasers and manufacturers. After almost 11 years of increasing numbers, the sales of SUVs and pickup trucks have finally begun to slide, adversely affecting the bottom-lines of US car manufacturer Ford. Consumers are increasingly choosing fuel efficient hatchbacks over their gas guzzling sedan counterparts, and sales of Hybrid vehicles have never been higher. "Necessity is the mother of invention" - I envision a time when the differentiator between car manufacturers that thrive and manufacturers that are relegated to a niche audience (or perish) is the Hybrid/alternative fuel strategy taken by the manufacturer.

The Big Oil companies can't be left out of this discussion, and if they continue to have their way, our dependence on fossil fuels is never going to end. It was a few years ago that Royal Dutch Shell posted record profits and earnings; unless something changes, there is no stopping the company from continuing to shatter its own earnings records. No wait, it might be trumped by another Big Oil Company...

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