Oil Prices

Oil prices

Again, this is a note that may have people wondering about the relevance of the topic. But there are good arguments on both sides, I think.

High oil prices are bad: They are bad for the economy overall. The affect every facet of our lives, from how our cities and suburbs are designed and how we go on vacation to how much our bananas cost. Higher oil prices mean we pay more for fuel for our cars, heating for our homes, which gives us less disposable income. This means that not only is there a negative

microeconomic effect, in which a family feels poorer, but also a negative macroeconomic effect. This means that because we are spending more on gas, we are spending less in other stores which in turn means an eventual slowdown in the national economy. Further, it makes it even harder for businesses to compete – and offer lower prices - because most business

models are based on a price of oil being much lower than it is now. It means less cheap imports, such as clothes, fruit, and electronics. It means that the cost of the suburbs increases. It means that there are no more weekend trips to drive to Grandma’s house, and no more weekends flying to Vegas or London.

The effects of high oil prices threaten to bring even more damage to an already damaged economy. Soon the possibility of a recession will be less a possibility and more a certainty. This means more bankruptcies, more people out of work, more jobs leaving the country. There are some people who also feel that high oil prices give even more control to oil producing nations

like Saudi Arabia, Iran, Iraq, Russia, and Nigeria – which some people feel is bad. Some people also worry that the high price may lead the US (or other countries) to invade countries with plentiful supplies so they can guarantee themselves a cheap supply.

The basic argument against high oil prices is that it means we spend more money on fuel, and have less money to spend elsewhere. This is compounded by the fact that we have no control over the prices; they are controlled by demand from China and India.

High oil prices are the best thing that ever happened: They are good for the economy – at least, if you happen to live in an oil exporting country, like I do. They prices lead to more money that is available to improve social situations – like, for example, in Norway. Another indirect benefit comes in the form of less damage to the environment – it is actually getting people out of their cars and onto public transit; and not taking those unnecessary trips. Instead of couriering documents, we scan and email them. All this means less pressure on the environment: we may be able to cut emissions because we have no choice. It may lead to better public transit, or more efficient vehicles.

High oil prices will force innovation. We, as westerners, have been  complacent for far too long, and have gotten used to cheap fuel, cheap transportation, cheap heat. When the “cheap” part disappears, innovative companies will develop thing that will bring that back – like a cheap

electric or hybrid car, or alternate heating for homes, or different types of gardens so that food doesn’t have to be transported so far. 

It will also change the ways that cities look. In North America, we tend to build big cities with suburbs, because we have the space for it and the cost of getting to it has been cheap. Now, fuel prices will make living in cities more attractive – if driving to work is too expensive, then living

in a downtown becomes practical. It will lead to revitalization of our cities, with more dense developments in older neighbourhoods.

What I think: I think both, as usual. I really hate paying the extra cost, and it does make me not want to do extra things, which is generally bad. But I think this is like a flu vaccine – some short term pain, maybe even negative side effects, but long term it will benefit us. That said, I don’t expect people to give up the suburbs and flock to the city on public transit while eating locally grown produce, but I think those changes will start to happen. I really hope that the high fuel prices will put a serious damper on Wal-Mart, because they rely so much on cheap imports. When the imports become more expensive, I hope their business model falls apart.  

How I relate: I think about city planning and design a lot, although I’m not involved in any of it. I live in the downtown of a city and have easy access to public transit, and this is the main reason why I use it – because it’s easy. I believe that most people are like that; they will do

stuff if it is easy, and higher oil prices will make it easier to for politicians to make changes.

As I mentioned before, I am married, and both my wife and I work. We have 1 car, which works fairly well now, but there will some changes coming that will make us re-plan some things. Fuel prices will definitely affect our lives in the next few years – where we live, if we get another a car and what kind, where we work, and how we vacation. Even how often we visit our

parents.