The following article from Polly Ghazi of the Guardian seems a bit vapid in its portrayal of new trends in the US economy: gas prices, commuting, housing, and car buying preferences.
But the fundamental question is not at all vapid. Are recent trends permanent? Or just part of a business cycle? CEOs of GM, Ford and Chrysler really want to know, as do most major investors.
Based on my none too expert 15 years or so of fiddling with oil data and simple oil depletion models, I tend to think that they are permanent, and reflect the long term decline of oil reserves as we pass "Hubbert's Peak," which is a 40-year decline the way I read the reserve data and the prognosis for new supply. (Which would include Iraq.)
But during this 40 years there will be fluctuations around the mean of the downward trend that seem cyclical at the time they occur, on timescales of a few months to a few years. These will be due to the basic systems math of oil depletion: high price causes conservation, a delaying feedback, albeit linear in function; while economic growth causes exponential decline, an accelerating feedback, exponential in function.
To get an idea of these short term cyclical trends superimposed on a long term downward trend, just look at the oil production data. You can easily see the cycles in the time series. The only difference is, until last year, the long term production trend was up, despite the cycles. This line will now, very slowly, start to turn south on us.
If this is too much theory for you, you can just read the article now.
Gas guzzlers and 'ghostburbs'
High oil prices are having a dramatic effect in the US, with public transport riding high and SUV production falling. Now, energy policy has moved to centre-stage in the coming presidential election. Polly Ghazi reports
* Polly Ghazi
* The Guardian,
* Wednesday July 2, 2008