Chris Steiner: Priming For $20/Gallon Gas

July 10, 2009

 

Crigger: But it sounds like much higher gas prices would drastically change the ways our markets currently function. The Internet made it possible for a grower in Brazil or China to find and ship to buyers all over the world, but under a situation of $20/gallon gas, that ends.

Steiner: Certainly I think you'd see an ebbing in the effects of globalization, although I don't think globalization will go away totally. Still, as far as shipping iron ore from Minnesota to China, that's going to be a pretty tall order in the future.

I think this will just lead us to value our resources more, leading to more recycling, local materials, better designs. The free markets will prove their effectiveness here. There are levels of efficiency that we haven't yet reached.

Crigger: So the days of China importing insane quantities of commodities from all over the world will be over, right?

Steiner: They'll have to adapt. There are materials close to them: Russia's eastern flank is full of raw materials that haven't been fully exposed. China will still import materials, I'm sure, but things will get more expensive, and they'll just find ways to be more efficient.

Crigger: Won't the return to more localized economies devastate some of the emerging markets that export lots of commodities, like Brazil?

Steiner: Going strictly off oil prices, people strictly exporting cheap, bulky, raw materials certainly won't be helped. But eventually you'll see alternatives. At some point in the future, decades maybe, I think globalization will make a slight comeback, as new technologies allow us to transport things at lower cost again. Whether it's through biofuels or nuclear-powered ships or electric, whatever, there may be a breakthrough when that happens.

Crigger: Speaking of alternative energy, I'll ask the obvious question: How does $20/gallon gas impact renewable energy?

Steiner: I think the future of renewable energies is obviously very bright, and very much linked to the price of gas. Obviously everyone was feeling really good about these when gas was $4.50 across the country. Interest as far as venture capitalists has ebbed, but it'll pick up again. I think we all realize that the price of gas won't stay at $3 forever.

But as far as reaching critical mass, that takes time. It will take decades, not years, for things to change. Even if we put a million electric vehicles on the road every year, which is an insane amount, it would still take 100 years to replace our fleet. We're going to rely on oil for a long time to come.

Crigger: So even as alternative energy sources become viable, we'll still see these effects you talk about. Basically, the electric car can't stop the mass exodus from the suburbs.

Steiner: Yes. [Alternative energy] will be able to pick up some of the slack, but not all of it. For one, we can't get enough electric cars on the streets fast enough; and two, they're going to be expensive. You're not going to be able to pick up an electric car for $15,000. Maybe you will eventually, but not in the next decade. Besides, I think people will take the path of least resistance: Rather than cut back in all facets of their life to afford an electric car, they'll just move somewhere they can walk.

Some suburbs will remain quite tenable situations, certainly ones where there are lots of stores and they're close to trains and so on. But I think the far-out ones, where you're driving five miles to get milk - you don't even have sidewalks in half these places - these are the places I wouldn't want to own a house in the future.

 

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