“If it ain't broke, don't fix it!"

Wednesday, May 28, 2008

Soaring Gas Prices: Looking at the Glass Half-Full

An article in U.S. News entitled “5 Upsides of $4 Gas” by Rick Newman caught me by surprise. We’ve been focusing too much on the downside of rising fuel costs that we fail to see that there are also upsides, as Rick Newman quickly points out. Now, this is a man who looks at a glass as half-full, instead of half-empty. The article is pretty interesting and is an eye-opener so I decided to post an excerpt here. The 5 Upsides of $4 Gas are…

1. Breakthrough technologies

Over the past 20 years, when gas was relatively cheap, automakers put a lot of effort into making cars more powerful—and not so much into making them more efficient. But with drivers suddenly desperate for better mileage, there's growing demand for technologies that improve efficiency without turning cars into threadbare econoboxes. A boom in hybrids—likely to double in sales by 2010, according to J. D. Power & Associates—is one obvious trend. But manufacturers are also ramping up investment in advanced transmissions, new kinds of diesels, better engines, cars that run on renewable fuels, and many other innovations that will make cars better and cheaper to operate. If developed in the United States, such technologies could become valuable exports, since gas is even more expensive in lots of other countries.

Here's the irony: This benefit will accrue only if gas prices stay high. In the early '80s, when gas hit the equivalent of about $3.25 per gallon, automakers did the same thing, plowing R&D money into more efficient cars. Then gas prices plummeted. "All that alternative fuel and powertrain research died instantly," says David Cole of the Center for Automotive Research. That will probably happen again if gas prices head back toward $2 per gallon and drivers return to big, powerful vehicles.

2. Less petroleum use

There's been talk for years—especially since 9/11—about conserving energy and reducing America's dependence on foreign oil. Finally, it seems to be happening. U.S. gasoline consumption has ticked down so far in 2008, for the first time in 17 years. That will probably intensify as people drive less and trade in big cars for smaller ones. There's a catch, though: If consumers cut back dramatically, that will reduce demand for oil, which in turn could lower prices—exactly what happened during other energy shocks. This time, it does appear that stronger demand from overseas is keeping prices high, so cutbacks in America may not trigger falling prices.

3. Better driving habits

Everybody knows that good car hygiene means keeping your tires properly inflated, changing the oil and air filter regularly, and turning off the car instead of idling. But it's like flossing: Who actually bothers? Well, now people are actually doing these things, since a 4 or 5 percent gas-mileage improvement can add up. In households with more than one car, there's better use of the family fleet, too: The smallest car is getting more of a workout, while the big hauler is reserved for carpooling or weekend getaways.

4. Greater awareness.

It goes without saying that ordinary Joes care a lot more about fuel economy these days. But even rich people are paying more attention. Three years ago, only 2.6 percent of the wealthiest consumers said the price of gas affected the kind of car they bought, according to surveys conducted by
CNW Marketing Research. By this spring, that had jumped to 26.7 percent. That's almost as high as the rate among middle-income buyers.

5. Less traffic

Americans have been logging fewer miles in their cars since last November, and the drop in March was the biggest since government tracking began in 1942. Train and bus use is up, more people are carpooling, and bicycle sales are rising. Among other things, that lowers greenhouse-gas emissions from cars. If drivers also continue to downsize their cars, that means less metal clogging the roads. I'm just speaking for myself here, but—hurray! A robust auto industry is great, but let's add value through technology and innovation, not mass and weight. And save a few minutes on the highway in the process.
You can read the rest of the article