Bracing for Increased Energy and Living Expenses

With plans to drive 2 cars approximately 1,400 miles from Wisconsin to South Florida at the end of this month, I’ve had fuel prices on my mind lately.

With good reason…just yesterday I put $25 in the tank of my soon-to-be-replaced gas guzzler and it didn’t even break past the quarter tank mark. Today, we are seeing news articles everywhere detailing the likelihood that fuel prices are going to increase this summer as they typically do. Interestingly, all indications that I have seen in recent days indicate that the high prices have little to do with the actual supply of oil and is more a function of the strong demand that still exists for gasoline and diesel fuel even as prices hover around $4.00 with the threat of rising higher.

So what do we do to counteract this effect?

In the short term…very little can be done. Americans might try a few simple things to reduce their consumption and spending, like carpooling, cancelling a family vacation or a trip to see distant relatives, but once these temporary behavioral modifications become too inconvenient or when prices dip a little bit, the typical American will resort back to what worked for them before.

If we are going to continue to import the majority of our fuel oil, what I anticipate it will take to bring prices down to a more affordable level is a series of long term changes in nationwide infrastructure and how cities and towns are configured in terms of where people live as a function of where they need to travel on a regular basis. The other option would be to tap into our vast domestic reserves in order to curb our dependency on oil imports.

Reconfiguring how and where we live…

Flash forward 12-18 months…Americans eventually get fed up with paying $4.00+ for gasoline and concede to the fact that prices are not going to return to where they were 6 years ago. Hummers, Expeditions and Tahoes are being replaced with more fuel efficient models, but prices have not changed because with more drivers on the road, consumption has remained about the same. My theory for what happens next goes something like this…

Eventually a significant portion of the American work force will grow tired of the extended workday commute and realize that their McMansions, which are really just garages with living quarters attached to them, are not worth the burden associated with their locations. In search of a better way of living and renewed quality of life, the 1960’s image of the American Dream (house in the country with a white picket fence far from the hustle and bustle of the city…) is abandoned. Life and the American way for millions of suburbanites across the country is re-engineered as families adopt a new-urbanist approach to living.

Along with the renewal of the urban core in cities across the country comes improvements to schools and parks as well as new businesses, all benefiting from the influx of spending (and tax) base from the area’s new residents. Ultimately, the cash that was otherwise spent on fuel and car payments is redirected toward products and services provided my local merchants. Quality of life improves as adults have replaced the 7.5+ hrs on average of commute time each week with time spent amongst family members, friends or simply getting more exercise.

Finally, as a not-so-surprising dividend, air pollution decreases and fuel prices stabilize making vacations to the countryside, where all of those sprawling subdivisions used to be, more affordable for all of those new urbanites and their children.