Peak Oil News: Gas goes up; thinking cap goes on

Sunday, April 24, 2005

Gas goes up; thinking cap goes on

Lifestyle changes -- including how we drive, where we shop and how we invest -- can ease the squeeze as the workd's oil supply shrinks


The squeeze that rising gasoline prices put on family budgets is a topic of conversation at filling stations everywhere, but the possible end of cheap oil is the real elephant at the pump.

A whole scary genre of literature is beginning to point the way to a time when world oil production will peak and then start a gradual slide -- even as global demand for the black gold expands. The book and magazine titles make clear where the authors think we're headed: "The Party's Over: Oil, War and the Fate of Industrial Societies"; "The End of Cheap Oil"; "Resource Wars: The New Landscape of Global Conflict"; "Hubbert's Peak: The Impending World Oil Shortage"; "The End of Oil: On the Edge of a Perilous New World."

Although many scientists and politicians argue the world has enough oil to last another century or more without problems, companies haven't been finding new oil as fast as they've been selling it in recent years. It's a question of when, not if, oil production peaks.

Some predict that will happen in the next 15 years. One author, Kenneth S. Deffeyes, forecasts -- more as an attention-getting device than a literal prediction -- that the peak will occur this year on Thanksgiving Day.

"Nobody will ring the bell and then the oil will be gone," says Bruce Ball, senior vice president of MKG Financial Group, a Portland investment management firm. But production will decrease as the globe's supply of oil taps out over decades, sending prices into ever higher orbit. A gallon of regular currently costs an average of $2.48 in Oregon, up from $1.98 a year ago, although that spike has more to do with short-term factors than the peak-oil theory.

We don't know exactly when, but the end of cheap oil means it will eventually cost much more to fill our gas tanks. A year ago, a 15-gallon tank of unleaded cost $29.70; today, it's $37.20. If the price doubles to $5, it could cost you $75 to say fill 'er up in the future.

The price of gas will also affect where and how we live, what we buy and how we invest. To get an idea of the scope of the effect, check the literature. The June 2004 National Geographic magazine cover story, "The End of Cheap Oil," is a good place to start.

Then try to envision how you, specifically, will be affected and think about what you might be able to do. We asked a half-dozen planners, consumers, conservationists and investment managers for their ideas about what actions can be taken in the short and long term. Things to do now The price of gasoline is a "creeping" expense that hits lower- and middle-income people first, says household budgeting counselor and instructor Rich Reiner of Portland. It's among necessary expenses such as food, housing and utilities, all of which shouldn't exceed 50 percent of take-home pay.

"When gas prices go up, it puts pressure on the other 'must-have' expenses, so we need to look at either cutting these expenses or becoming more efficient with the income we have," Reiner says. Do that by cutting the number of trips you make, using mass transit, carpooling or using one car instead of two.

To cut car costs, drive it longer before buying a new one, shop for cheaper insurance and drive less frequently and more slowly, Reiner says.

"I would not recommend buying a new car just for fuel efficiency unless you were ready to buy one anyway," he says. "It takes a long time to recover the costs saved on fuel. The exception might be if you could double the mileage and buy a good used car."

Other ways to squeeze more mileage out of a tank of gas include properly inflating your tires; keeping your car tuned and its oil changed and clean; reducing drag and weight by removing roof carriers or unneeded items in the trunk; and tightening your gas cap to avoid losing fuel to evaporation.

Shaun Davidson of Portland is finding ways to save money and help the environment, too. He drives a Volkswagen Jetta fueled with biodiesel, a renewable resource made from soybeans blended with diesel fuel.

"I get 49 miles to the gallon, and it's pretty zippy," he says. When his wife's Mazda was stolen recently, the couple decided to test whether they could get along with one car.

Things to think about doing Ethan Seltzer, Portland State University's director of the Nohad A. Toulan School of Urban Studies and Planning, commutes on a Vespa scooter.

As oil prices increasingly rise, people will adjust to higher transportation costs with more mass transit, biking and walking. They will use more services that bring food and other products to their homes.

Seltzer says he frequents a Northeast Portland restaurant that delivers, has Netflix send him movies and orders Kaiser Permanente prescriptions by mail.

"We could be seeing a return of the old vegetable peddlers," he says of produce wagons that once frequented Portland neighborhoods.

Real estate prices will factor in demand for nearby transit and services as more people want to live closer to what they need.

Real estate lending will adapt, too. Already, Seltzer says, the nation's largest mortgage buyer, Fannie Mae, is promoting "location efficient" mortgages, which allow homebuyers to borrow more of their home's purchase price if they agree they don't need a second car. Portland has such a project at Northeast 65th Avenue and Glisan Street, he says.

Go green "Green buildings consume less energy than normal buildings, saving the owner money in the long run," says Davidson, the biodiesel driver. Davidson points to several houses in the Alberta Arts district that have used "green" consultants to maximize energy savings.

More information about ways to save by going green can be found at the U.S. Green Building Council Web site,

Portland and Vancouver have several resources for help with green consulting, including Earth Advantage, Built Green of Southwest Washington and Portland Green-Rated.

Invest smartly If you agree the writing's on the wall about oil supplies, a prudent investment in oil exploration companies and alternative energy sources could be in order, says Mark Gaskill, chief executive and chief investment officer of MKG Financial Group.

Drilling companies and makers of offshore oil rigs could also be good bets as demand for oil soars. In the alternative energy field, MKG money managers like manufacturers of hydrogen fuel cells, which are batteries that would run electric motors in cars of the future.

Hybrid cars are a good way to extend gas mileage, but they still use gas. An alternative energy source is better, Gaskill says.

"You may not want to own airlines, but telecommunications and videoconferencing could be strong," Gaskill says.

Investors also might benefit by buying shares in nuclear power companies and utilities.

"You'll see a nuclear comeback, because it's cheap and efficient," he says.


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