Timothy Taule

As the average price for a gallon of gasoline moves past $4 and diesel closes in on $5, it seems clear that Americans will soon start shutting down discretionary spending for everything. Disposable income already was under pressure before the latest runup in fuel prices, eaten away by huge jumps in the price of food and other necessities. In the end, people will have little left for anything beyond housing, food and energy.

What does that mean for construction? Poor market conditions will slowly creep into the retail, commercial, industrial and manufacturing sectors as the full costs of fuel inflation are ultimately delivered to consumers, who will have to watch every nickel. It will take time, but the outcome is inevitable, just as everyone knew that the tech and housing bubbles were going to burst.

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The trouble with this petroleum bubble is that many experts don’t expect the price to collapse because of the combined impact of increasing demand in developing economies and declining production in mature fields, such as the North Sea and North Slope. Some are betting that oil prices will hit $200 a barrel by the end of the year.

Some people thought the Petroleum Age was coming to an end in 1973-74, when fuel often was not available at any price because there was limited supply due to the Arab oil embargo. Demonstration projects for synthetic fuels were developed at great cost to provide alternatives. They worked but were abandoned when oil prices collapsed as global demand evaporated during a couple of economic recessions. At one point in the 1990s, gasoline was so cheap it could have been processed seawater by comparison.

The good times of the past decade are over, and maybe the same thing will happen to oil prices in the coming economic crisis. Even so, research and projects that provide alternatives should continue with greater will and fortitude than was shown in the 1970s and 80s. The world is not a candy with a petroleum nougat core. This is a finite resource that will expire in time, and our whole world is built around it.

Hydrogen, biofuels, wind and wave energy and even nuclear power all hold great potential. All we need is a change in attitude. Even if you don’t buy into the global warming argument, you will sign on as your paychecks are offered as tribute to the great petroleum god.