Irritable Bowel Syndrome Message Boards

Yeah, this is something that's not going to go down anytime soon -- take instability in petroleum exporting countries, random hurricanes knocking out production, huge economic growth in China leading to high demand for cars (all of which need gas) and concrete (which takes a pile of energy to create), and finally (this is the kicker), the fact that oil is running out.

All this means is that its unlikely that you'll see gas prices below $2/gallon much anymore - in fact, I assume that they should reach $4-$5/gallon within about two years. The good news is that, once the economic shock has rippled through the economy, it will both increase people's awareness of energy efficient vehicles, methods of heating homes, etc., and it will make general energy levels high enough that alternative sources of energy will become economically viable to produce, which will also increase the amount spent on R&D for them, lowering their marginal price.

Of course in the 'long run' everything looks great in economics - the problem is of course the short run shifts in prices have a heavy impact on people who can't immediately adapt to the price signals, generally because there are very few people who can go out at the drop of a hat and buy the major items that high energy prices affect -- cars and houses. The latter will be especially tough as things go on - many people can make due with alternative transportation to reduce costs, but there's only so far you can turn down the heat in the winter.

As a side note, energy prices also have an impact on urban planning. Cheap gas essentially made the American suburb possible, while in Europe, artificially high gas prices made people opt for denser development and an emphasis on viable alternative transportation. The article that I read about this is here: http://search.csmonitor.com/search_content/0826/p01s03-woeu.html if anyone is interested. The graph at the bottom of comparative MPG across several countries is also informative.

- Vincent

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