Friday, July 25, 2008

The End of the Automobile Era

As we travel people are constantly complaining about the price of gasoline. While it has fallen recently, the price of gasoline is still at a level that most people thought impossible just a few years ago. High fuel prices have significantly raised transportation costs in Central Asia and everything from shared taxis to food is getting more expensive as a result.

While some people blame this on speculation, there can be little doubt that the demand for gasoline is growing faster than the supply. By the inevitable forces of free markets this means that gas prices will continue to rise until demand falls or until new supplies become available. There aren't many good alternatives to gasoline right now and most of the earth has been explored so there are unlikely to be any more Saudi Arabias waiting to be discovered. The alternatives, like tarsands and shale, are dirty and expensive. I think we are going to see some profound shifts in the way we live.

Surprisingly, poor countries will probably not cut their consumption much even with big price increases. The simple reason for this is that they consume very little oil per person. Poor countries often have well developed public transportation systems because most people can't afford private cars. In China for example there is a fantastic rail network between all the major cities, and nobody but the very rich would consider driving from Beijing to Xian.

In Central Asia the public transportation systems are in a shambles. However, the majority of vehicles on the road are still jammed full of passengers. Almost everyone driving between cities here tried to find other passengers at a shared taxi stand to share the cost of gas. A shared taxi with 5 people in it uses much less gas per passenger kilometer than a Prius with a single commuter, which means that relative to us, people in poor countries are using fuel *much* more efficiently.

So if consumption is going to fall significantly it will have to fall in the rich world where the roads are full of enormous vehicles driving around with only a single passenger. In the west many people think nothing of driving an SUV to the office every day. The law of supply and demand says that driving this SUV will soon become extremely painful. At which point would most of the people *you* know change their driving behavior? That is what will determine how high gas prices will go.

Would $2.00 a litre make you take the bus? If not, it probably won't convince your neighbors either and gas prices will go up. Would $4.00 a litre convince you to sign up for a ride share program? If not, it probably won't convince your potential passengers either and they'll also continue to drive. Would a $500.00 gas surcharge on airline tickets convince you to cancel your vacation in Mexico? There comes a point at which our wasteful behaviors must change because we simply cannot afford the alternative.

We are about to witness a profound shift in the way we travel. Trips like the one Lara and I are doing where we travel great distances in planes and taxis will become much more expensive. Commuting an hour to work by yourself every day will seem like an outrageous wast of money. Cars won't go away any time soon, but we'll be taking a lot more buses and sharing a lot more rides. Gas prices can quadruple at no cost to your commute if you pick up three passengers on the way to work. I think we are up to the challenge. There are 4 billion people in the developing world who are leading the way.

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