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My friend Jim calls to suggest that I sit back and think about the subtle and not-so-subtle consequences of today's energy prices. That's what Jim used to do for a living. He was the corporate strategist for a multibillion-dollar company. His job was to ask "What if ...?" and then connect the dots.
"For example," Jim says, "we are rolling back the transportation clock 30 years. Airlines are toast. People think nothing about flying somewhere for the weekend -- to their second home, for instance. To them, cheap fares are a birthright. No more."
Running on fumes
It's so bad, Jim adds, that one major airline didn't operate a single profitable route within the U.S. this past spring. Now fuel prices are even higher. "Instead of seven or eight major airlines," Jim continues, "imagine just two or three, at most. Instead of $400 discount fares to fly from coast to coast, think $800 or $900."
Then people will take trains more often, I suggest. No they won't, Jim replies, reminding me that since the government nationalized intercity passenger service in 1971, politicians have kept Amtrak on a starvation diet, giving the train service just enough subsidy to stay alive but not a dime to grow. Every budget director and every president since Richard Nixon has hated Amtrak. Why expect that to change? my friend asks.
Jim hangs up, but by now I'm in a groove and begin connecting my own dots. I think of where people live. My family's house, just across the Potomac River from Washington, D.C., will probably rise in value -- we live close to our jobs. But people in the far suburbs won't be so lucky. Maybe our housing developments will begin to resemble those in Europe -- denser and closer to central cities. Our homes could be smaller, too. The 10,000-square-foot McMansions built during the past decade will cost a fortune to heat and cool.
What happens to family vacations? We'll make fewer road trips. Sell your Walt Disney Co. stock! I just cannot see people continuing to flock to Orlando. Or Las Vegas, for that matter. Beach cottages an hour away are in. Mountain homes four or five hours away are out. Simple pleasures are in. Expensive ones are out.
I'm not suggesting that our lives will deteriorate in quality, although I suppose that's possible. I am saying that they will change. We'll adjust. We'll drive less, fly less. Instead of commuting 30 or more miles, we'll seek jobs close by or ones that let us telecommute and teleconference. Is that so bad? No, but it's different.
And speaking of jobs, the U.S. auto industry will undergo wrenching change. General Motors, Ford Motor and Chrysler are already struggling to stay alive. Maybe there won't be room for all three in the future -- or for all the nameplates from Europe and Asia. Please don't start a trucking company -- ouch. But freight railroads, many times more fuel-efficient, are sitting pretty. I can imagine colleges offering degrees in windmill engineering. Flight schools are in trouble. But going through security at an airport will be a piece of cake.
The end of eras
In lamenting the closing of the American frontier, historian Frederick Jackson Turner said in 1893 that it had molded the national character -- made us who we are. But the end of the era of cheap (if not free) land didn't fundamentally change us as a people. Nor will the end of the era of cheap energy. But we will have to adapt, and those who do it best will prosper most.
POSTED BY: GoGlobalWarming (August 11, 2008 11:00 AM)
Give me a break. Don't you know that ALL markets have their ups and downs? Energy prices go up and then they go down. I'm sure there were saying the same things back in the 70s when oil was shooting through the roof like "everything will change". Walt Disney is a great stock with an unbeatable brand name that works as a "moat" keeping out competitors. The various Disney "lands" are only part of their revenue stream anyway! Airlines and automotive companies are also quite cyclical. They go up and they go down. That is not to say that people will stop flying or driving their cars. It is true that consolidation may occur as it does in ALL down markets. It is a time when the weak companies are weeded out and only the robust ones remain to make huge profits when the economy turns around. It is times like these, when people say things have changed, when it's time to make a move. In 2000 when "things had changed" and eyeballs were more important than profit that one needed to get out. The gloom and doom right now mean that it's time to buy in.
POSTED BY: Dan (August 11, 2008 10:00 PM)
I remember when our government had money to take on projects like the national railroads, interstate highways and going to the moon by the end of a decade. Too bad we are not now in a position to do the same with energy and provide it cheaply. The Pickens plan is okay but it will not bring down the cost of energy. I will certianly make alot of people very wealthy at the middle classes expense. Tax the very wealthy, pay down the debt and start the largest energy project the world has ever seen. Then use the profits to put our country back at the top.
POSTED BY: tim (August 12, 2008 09:56 AM)
dan,
i suggest you read the (kiplinger.com) article...on the front page about who already pays the taxes now. i think you will see the bottom 50% only pays 3% of the total taxes while the top 1% pays almost 40%. so your robin hood tactic does not work. if you respond with"tax the companies"then more jobs will be lost resulting in more of your "tax the rich"to pay for more social services for the poor....
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