photographer: Melissa Lyttle
The first gas crisis in the United States in recent (post WW II) times was during the winter of 1972-73. The second gas shortage was during the summer of 1979. It was during that crisis that gas prices broke (at least in the Northeast U.S.) $1.00 a gallon for the first time. Those were the good old days. Fast forward to 2008, when, for many parts of the United States, gasoline is now topping $4.00 a gallon, and rising daily.
Despite the fact that we are almost 30 years down the road since the last energy crisis, we are still almost totally dependent on petroleum-based fuel. Electric, natural gas, solar, hydrogen and to a lesser extent ethanol, have failed to make a significant dent in our demand for petroleum-derived gasoline and diesel fuel.
There are still virtually no all-electric, natural gas or hydrogen vehicles on the road, with a fairly insignificant number of these alternative-fuel vehicles in some fleets, such as utility company, transit authority and delivery company vehicles. Have you ever seen an electric, hydrogen or natural gas refueling station ? Even today, for all practical purposes, gasoline and diesel are the only fuel options available. What percentage of the privately owned passenger vehicles in the U.S. are all-electric or gas-electric hybrids ?
Despite more energy-efficient homes and appliances, we continue to set energy consumption records. Electric utilities generally set new winter and summer peak output records each year. It seems that no matter how efficient our homes or cars become, no matter how hard we try to conserve energy, we will never see lower demand for energy. All we can hope to achieve is to slow the increase in energy consumption.
While the increase in total energy consumption varies by geographic region and market sector, consumption generally increases between 1 and 3% annually (see US Department of Energy report).
Now couple our ever-increasing appetite for energy with the fact that developing nations, most notably China, are significantly increasing their energy use. It portends continuing increases in the price of energy from all sources, not just oil. It also means tighter supplies and future energy shortages (see this April, 2008 AP article in the NY Times about tight oil inventories). With the summer approaching, shrinking gasoline supplies (despite higher prices), and increasing seasonal demand, it’s a recipe for trouble. They are even attributing a decrease in U.S. oil supplies to fog in the port of Huston. What’s next… blaming it on which way the wind is blowing ?
Recent world events related to shortages of food staples such as rice, wheat and corn are already being felt in the United States. While there does not appear to be a true shortage yet, the prices of all these commodity items has risen sharply in recent months. And yes, much of this increase can be tied to the price of oil.
We are seeing more and more instability, in terms of price and availability of food items. In just the past few weeks, rationing (or more accurately, purchase limits) have begun to pop up at retailers around the United States, on rice and flour. While panic buying is likely to blame to a great extent, a tight supply is no doubt at the root of these actions, as well as the sharply higher prices.
Gasoline is subject to exactly the same market behaviors as food. To some extent, it is even more vulnerable. You can’t plant more oil seeds next Spring in anticipation of higher demand. The crude oil supply is more or less constant, at least for now. It’s a non-renewable resource, so once it’s gone, it’s gone forever.
It would not take much to touch off panic buying of gasoline. A steep short-term increase in the price of crude, a new political crisis in the Middle-East, a weather-related emergency, or some unforeseen event that influences energy markets, are all capable of creating a crisis overnight.
We think that the recent run-up in gasoline prices has significantly increased the likelihood that we will see another gas crisis in the near future. This is regardless of whether there is a true shortage, or if it’s just panic buying that takes hold. Don’t be surprised to see gasoline rationing being put in place as soon as this occurs, whether it is imposed by the retailers, or by the government. Don’t be surprised to see long lines at the pumps, a la 1972.
- Routing By Rumor