Monday, September 05, 2005

Life, Liberty and the Pursuit of Cheap Gas

So the day has finally arrived. My SUV is too expensive to drive. I filled the 21 gallon tank last night and the bill was $63 bucks. This is after I spent 30 minutes driving around Detroit trying to find the cheapest gas station.

Those of you who know me well (i.e. a global warming believer, Kyoto Accord endorser, who recycles most of the time :) will know that the decision to SUV was made at a weak moment. An offer of employee pricing (20% off MSRP!!!) from my auto client and the appeal of barreling down the interstate sitting on almost 300 horsepower (after 10 years of driving my anemic, asthmatic 130 hp Mazda 626) conspired to making me say yes.

My one saving grace was that I only signed a 2 year lease; a contract that I will gladly look forward to ending next August when I trade in U.S.S SUV for a Japanese hybrid.

I think the high price of gas is because of a fundamental shift outward of the oil Demand curve to recognize the arrival of India and China on the global economic scene. For the first time ever there are two strategic competitors to the voracious US appetite for oil and this demand is the basis for the high prices. Adding to this are the temporary spikes caused by the market shocks of the Presidents misadventures in Iraq and Hurricane Katrina.

The one potential upside to all of this bad news (which brings slight joy to me here in the summer of my gasoline discontent) is that this is going to seriously hurt President Bush and the GOP in the mid term elections next year. I think the enduring and real hit in the pocket book of the high price of gas has the potential to stick in the voters memories far more than something as abstract as the outing of a CIA officer or the Downing Street memos. This is also something that is generally very hard to pin on Liberals and on the Clintons in particular although I am sure Karl Rove will try.

The other unintended consequence of all of this is that our enemies (both perceived and real) grow richer and richer at our expense. Saudi Arabia will likely not have a budget deficit for the first time in a decade and enough loot from the $70 / bbl price of crude to keep the 5000 princes of the House of Saud in Rolls Royce’s for another generation. Iran’s mullahs have enough money to hand out subsidized tidbits to the poor and thereby continue to stave of discontent and delay reform and of course Hugo Chavez (our supposed latest bete noire according to the rabid right) is smiling all the way to his Swiss bank account.

I expect gas to go to about $4.00 a gallon in the next quarter – it will eventually stabilize back down to a new equilibrium price of about $3.00 a gallon. I am personally glad that gas prices are finally high enough to force the citizens of this country to change their behavior. For too long we have believed that we have a God given right to consume without thinking. The honeymoon is over. Detroit has no choice but to change and start producing Eurocars and hybrids. The American consumer will force them to do so.

Le SUV est mort – vive le hybrid.


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