Friday, March 23, 2012

The Case for High Gas Prices

Once again, gas prices are up — more than 30 cents over the past month. Some forecasters are predicting a price of $4.25 per gallon at the pump next month; others see it going up to $5 per gallon this summer.

And once again, the response is predictable, if not comical. The Republicans blame President Obama. They say that he blocked the Keystone XL pipeline and that he's secretly in favor of higher gas prices as a social engineering strategy designed to punish Americans into accepting alternative energy.

Obama blames Iran for disrupting oil supplies, sees growth in China and India as driving up oil consumption and, when asked whether he secretly favors price hikes, resorts to sarcasm to dismiss the accusation.

Me, I'm not running for office. I blame feckless politicians from both parties for the lack of a sane energy policy over the past 40 years. And unlike Obama or his Republican challengers, I want higher gas prices. At least for a while. Long enough for us to get the market signals right and to continue to wean ourselves off our fossil fuel addiction. The way I see it, every time we've been confronted by an energy crisis, Americans have done the right thing. Faced with the cold hard economic facts of life when it comes to oil availability and price, we've figured out for ourselves how to be innovative, resilient and sensible. Having plentiful cheap resources can make us wasteful; scarcity and high prices can make us smart.

If that's what it takes, I'm all for it. And if it can drag business and the government along behind us, I'm for that, too.

Take the auto companies. For years, General Motors resisted doing what everybody knew it needed to do to adapt to global competition and a changing market. Finally, the crushing financial crisis and rising gas prices pushed the hubris-haunted company into Chapter 11. Today, GM can claim record profits and its Volt electric vehicle, though struggling in the U.S., was chosen car of the year in Europe. The whole auto industry, which resisted the suggestion of government-mandated fuel economy standards back in the 1970s, today has demonstrated a new sense of responsibility for more ambitious requirements. Why? Because the automakers can read the writing of the gas prices on the wall.

Today, while politicians do their comedy acts about energy prices and Obama promises Americans he's doing all he can to keep gas costs at the pump from rising, pragmatic business people are doing what they know they should. Architects and developers are calculating the lifetime costs of the buildings they put up, with the knowledge that oil-based energy will only get more expensive over time. More and more Americans are looking to alternative energy sources for their homes; companies and communities want to kick the oil habit; the rise of car-sharing and increase in public transit use demonstrate how expensive gasoline can create new economic opportunities and spawn new habits. Last year, Americans took 200 million more rides on subways, commuter trains, light rail and public buses than we did the year before, the American Public Transportation Association reports.

And it's not just in the private sector or our private lives. One of the leading areas of change is in the military, which is going green for more than just environmental reasons. The Navy has figured out that the "all-in" price of oil means that it's cheaper, safer and smarter to switch our war-fighting operations from fossil fuel to renewable resources. They're doing it because they have calculated the real cost of oil and figured out that embracing renewable energy makes sound economic and military sense.

All that has been happening before the latest price spike. Now it's time to think seriously about what comes next. Beyond fuel efficiency in transportation and buildings, beyond alternative energy sources is the next big thing: the switch to local economic development.

As the late House speaker Tip O'Neill once observed, "All politics is local." It turns out that for a better, smarter, more sustainable future, all economic development is local, too. If we want to embrace a future with more and better jobs, more local autonomy and more sustainable communities, we need to look at this oil price rise as another market signal: It's time to focus on local economic development.

It's just plain smarter to produce and buy local products and services. Whether products come from local farms or local shops, local factories or local vendors, when we support community-based businesses we contribute to more home-grown jobs, stronger communities and a sustainable future.

It's the next stage of an evolutionary process that has been unfolding below the radar screen for the past 40 years. It's a simple enough equation to grasp: The more we see oil prices rise globally, the more we'll see the emergence of economic development locally.

Change happens when the cost of the status quo is greater than the risk of change. Right now, rising oil prices are driving up the cost of the status quo. That means it's time for all of us to embrace the risk of change. Once again. Because that's what we've done every time in the past when we've been challenged with higher prices and lower availability. It turns out, we're at our best, our most innovative and our most pragmatic when times get a little bit tougher.

(My column this week from USA Today)

All Rights Reserved 2009 (c) Alan Webber, Rules Of Thumb