Every morning it seems oil hits a new record high. The economic and political results are reverberating throughout the world: corporations are restructuring their supply chains, car sales are shifting, subsidies are being slashed and politicians are posturing about "gas tax" holidays and suing OPEC governments. The stakes of this oil spike are as high as prices.
Much verbiage has been spewed about our addiction to oil and its coming end. Americans don't seem to realize that while this will most certainly be painful, proper policy may ensure the economy can gain some benefits from the necessary and unavoidable restructuring. The obvious changes will be in the energy industry, manufacturing and shipping. But the words oil, housing, and unemployment are rarely mentioned together.
Whether or not this is "peak oil", the American government must act swiftly and drastically to buoy the economy. As the housing market slumps with no indication of quick resurgence, unemployment is also on the rise. Proper policy would encourage restructuring that promotes long term growth while limiting short term losses. There is no doubt moving our country away from oil dependence will be expensive and painful. But there is no reason the end result has to leave us worse off. So what to do?
Tax, tax, tax. The sooner gasoline reflects the true price of oil (or ideally, more) we will begin to see the housing and labor markets, which are imperative to proper reconstruction, bottom out as workers move from "exurbs" and more homes are foreclosed. The spike will be a painful, short term symptom with a more efficient and fluid housing and labor market as the end result.
The process will most certainly hurt but knowing the true extent of the housing crisis quicker will help the financial industry glean their sheets honestly and encourage labor mobility - benchmarks for a "new economy".
2 comments:
This is another great post - quite well written and I agree with your points. The question is this: we all agree the US needs to find alternative fuel sources in the long run, but how willing are people to change in the short run? You talk about people moving from the exurbs back to city centers. This sort of stuff may be ideal, but who wants to be the one to tell people that they need to forfeit a large house and ample yard to move into a tiny townhouse and deal with massive urban density? One thing that always strikes me is how spread out the US is - isn't that sort of 'open space' mentality part of our national mindset, and if so, can (should?) we change this?
The other major question is whether or not the economy, which is already in the doldroms, can sustain higher operating costs. Historically, the US is the most inefficient user of oil in industry, etc.
I guess it really boils down to: how much pain are we willing to take for a better future outcome?
I think you're points are interesting but would argue a few things.
I'm not talking about people necessarily wanting to move to the city centers...i think it will become economically impossible to avoid and we will see greater and greater instances of gentrification, urban renewal, whatever you want to call it. And I do not think "open space" is part of our national mentality at all.
Secondly, I think this would actually lower operating costs for the economy relatively quickly. Cities are traditionally the largest wasters of energy so to increase their efficiency is relatively easy. There are cheap measures (i.e. capturing normally wasted steam, among others) that do not cost much to install and will save money. More people in the cities simply increases the output of this equation.
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