When We are Vulnerable to Oil Price Increases

It was not too long ago when I was paying one dollar something per gallon for gas (see picture on the left). In fact, the memory of those days are still fresh in my mind. We did not own a car then, but we rented cars frequently to make day trips out of the city. Those were the care-free days that I recall fondly like it was only yesterday, which indicates to me that it was really not too long ago. 6 years ago to be exact!

When I got my car two years ago, gas prices were around the $2 per gallon range. I commuted to work daily and did not feel the pinch. By the end of 2007, I began to notice the increase in gas prices, but I was not too worried about it. The dramatic gas price spike this year though has gotten me to modify by driving behavior. In most places, consumers are paying more than $4 per gallon today. That's double what I paid in 2006/2007. So I am driving less these days, and when I do, I try not to accelerate and brake frequently. I pump gas in the early morning, or night when gas is supposedly compact, and so you get more when you pump. Never thought I'd be such a penny pincher, but you do what you have to do.

Only thing is, I like my comfort. As so many others do. I cannot see myself walking or biking to the grocery store on a hot humid summer day. Apart from the sun damage worries, I simply do not like to sweat when I am not in the gym, or running for exercise. Besides, I do like to dress nicely and not be in sweats and sneakers all the time!

That got me thinking about what the future holds. If gas prices continue to spike, will I be forced to do the unthinkable? Which is to garage my car semi-permanently? Will the future see me trudging around on foot or bike all the time? Scary indeed. But not nearly as scary as what this crisis means for millions of people around the world who are on just on the poverty line.

Suhc people will feel real pain as long as this oil crisis lasts. A trucker who cannot make a profit when the diesel price rises 40 – 50% overnight is one who effectively becomes unemployed, and he cannot afford to feed his family. There are protests in countries as diverse as Egypt, Vietnam, Portugal, Kenya and Thailand, over oil prices and food prices, subsidy cuts, and inflation. This translates into political problems.

China just announced that it will raise prices for fuel by as much as 18 percent this Friday. The move is intended to cool the nation's surging energy consumption. Will there be local protests over this move - consumers angered by already expensive prices and shortages at the gas pump. India, the other large energy consumer, might be forced to follow suit, if it hasn't already. There is a Saudi summit being planned this weekend where Saudi energy officials have indicated some willingness to increase oil production.

Prices may come down somewhat - for instance, oil prices went down $5 immediately upon the China news.

But I somehow doubt if measures like these will have any significant effect on the supply-demand dynamic for oil worldwide, which is what this oil crisis is really all about.

What do we do about it?