THE VINE JUNE 26, 2008
Via the WSJ's Keith Johnson, this new oil forecast from Jeff Rubin of CIBC World Markets is genuinely shocking, especially with its prediction of $7/gallon gas in the United States by 2010. There seems to be no way to avoid it: Saudi Arabia's pledge to pump out more crude amounts to a "pittance," China's decision to cut gas subsidies will barely move prices, and the most promising attempts to open up new supplies, in both the Canadian oil sands and Gulf of Mexico, have been plagued by overruns and delays. So, add it all up, and the effects on driving in the United States are going to be titanic:
Over the next four years, we are likely to witness the greatest mass exodus of vehicles off America’s highways in history. By 2012, there should be some 10 million fewer vehicles on American roadways than there are today—a decline that dwarfs all previous adjustments including those during the two OPEC oil shocks. ...
Our analysis suggests that about half of the number of cars coming off the road in the next four years will be from low income households who have access to public transit. At their current driving habits, filling up the tank will have risen from about 7% of their income to 20%, an increase that will see many start taking the bus.
If a nightmare scenario like this comes true, it'd be hard to overstate how monstrous a change this would be. Nearly 57 million car-owning households have "reasonable" access to some form of public transit, so that's where most of the shift will happen, but even then, it won't be easy—especially since transit systems are already overwhelmed (and facing budget shortfalls themselves because of high oil prices). And people in more remote—and especially rural—areas will be screwed.
Eventually, land-use patterns would start to change. Already people are starting to move out of the suburbs and closer to city centers in response to high gas prices, but it's another thing entirely for millions to abandon the vast car-oriented infrastructure we've erected over decades and try to adopt European-type living patterns in just a few short years. To put things in perspective, only about 5 percent of Americans used public transit to commute as of 2005, compared with about 50 percent in Japan and Europe, where pricey gas has long been a reality. It's not clear whether the United States could scale up that quickly by, say, 2012, though it sounds like, among other things, it would be a good idea to get started now. (Oh, and that's not even touching on the potential for stagflation if $7/gallon gas really is on the way.)