Don't panic: oil prices will force us to adapt

Published in the Saskatoon StarPhoenix, August 15, the Edmonton Journal, August 20, the Sunday Herald (NS), August 24, the Trail Daily Times, August 27, the Windsor Star and Ontario Farmer, September 2, the Yorkton News Review, September 3, and the Lakeside Leader and Airdrie Echo, September 10, 2008.

By David Seymour
Saskatchewan Policy Analyst
Frontier Centre for Public Policy

David Seymour Despite their recent slump, high oil prices may turn out to be history’s reference card for 2008. Many pundits would happily file it next to 1973 as a watershed in economic history. They claim we have reached a “tipping point” where oil will be permanently more expensive than before because this oil shock is caused by a natural shortage rather than a 1973-style politically created one.

One of the most popular predictions to stem from this observation is that we will be forced to re-create cities without the car as we know it. Canadian cities, it would seem, were built on the premise of affordable energy, and government tax and planning policies have quietly subsidized the cities’ far-flung suburbs. Very soon, the arguments run, energy economics will force cities to become more compact so we had better get ahead of the curve now.

However, by changing a few assumptions, the continuation of our lifestyle with private transport (cars of some kind) looks more probable than impossible. While permanent $4 or $5 per gallon gas prices are new territory in North America, they are not a “tipping point.” New Zealand and Australia, for example, have been dealing with the equivalent of these prices for years and more recently with the equivalent of $8 or $9 per gallon gas prices. Suburbia still looks much the same there as it does here.

Even if the price of oil were cataclysmically stretching our household budgets, re-forming our cities into models of nineteenth-century London, or even moving in that direction, would not be the most economical answer. Cities such as Saskatoon and Regina were built over a century, and to remodel them painlessly would take as long as the lifecycle of the average building.

It is not also clear that compact cities are more energy efficient. It seems obvious that smaller cities mean shorter travel distances, but the mere existence of faraway places in a city does not mean everyone goes to them all the time. As a resident of south Regina, I am more likely to visit another country than to go to Northgate or the East End mall. Satellite areas can be self-sustaining and can actually minimize travel.

If something must change, it will be technological innovation. China and India may boast a burgeoning middle class that makes its Western counterpart look like an endangered species and may have shifted the demand for oil so that prices will be permanently ‘high.’ However, they have also raised the reward for the innovators who liberate the car (and us) from dependence on oil.

Well-known urban planning polemicist James Howard Kunstler recently gave a video speech on the prestigious Technology, Entertainment and Design Web site. “We are not going to have a hydrogen economy. Forget it!” he bellowed. Unluckily for him, BMW had bought all of the Web site’s advertising, including the trailer to his speech, to showcase its new generation of hydrogen cars

Kunstler was unfortunate, but his predicament should not be surprising because innovation is unpredictable by its very nature. If I knew what the Next Big Thing in transport technology was going to be, I would not be working for a non-profit. Humankind’s position is awkward. We cannot have a concrete vision of technology’s future, but its past makes betting against transformational innovation seem foolhardy. Indeed, GM is planning to release a Prius-eating, mass production, wall-socket rechargeable, electric commuter by 2010.

Every generation holds the vain belief that its challenges are uniquely apocalyptic and that drastic measures are necessary, but even our challenges are not extraordinary in the whole of history. If planning and taxation policies exacerbated the current price squeeze by expanding the cities, we should be mindful of the unintended consequences we might reap from policies designed to reverse the trend.

We should not panic. Society will respond to changes in the world market just as it has since Marco Polo first crossed the Silk Road: Prices will change, behaviour will adapt and technology will develop. Prescriptive policies that restrict society’s options will only slow down the adaptation process.

Keywords: David Seymour, oil, oil prices, urban planning, suburbs, energy efficient, hydrogen, apocalypse, panic, adapt

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