2008, a Year of Petroleum Exuberance

By Warren Brown
Sunday, December 30, 2007

NEW YORK

It's time to make a few bets. They are written here to determine the accuracy of my prognostications at the end of 2008.

¿ Gasoline prices are going down and will remain down throughout 2008. The decline will be attributed to the fine work that Congress did this year drafting a truly comprehensive national energy bill. At least, that is what we will be told, especially by Democrats who championed the measure signed into law this month by President Bush. Some other causes will be cited for the fall in pump prices. They will include a slowing world economy that needs less oil; the prospective exploitation of bountiful new sources of oil, such as Canadian tar sands; military and diplomatic progress in Iraq; and the growing prospect of peace in the Middle East.

We will witness the dawning of an era of exuberance regarding matters petroleum, a time of optimism comparable to the Roaring Twenties and the recently expired housing boom that was inflated by phony mortgages. Peak-oil theorists, those people foolish enough to believe that a nonrenewable resource is eventually exhaustible, will be vilified as alarmists. American consumers, mollified by falling petroleum prices and the promised availability of more exploitable oil reserves, will breathe sighs of relief. And they will spend the summer before November's elections wrestling with issues of gravitas, such as whether our presidential candidates, Democrat and Republican, support the right of adults to marry whom they choose to marry.

¿ We will see more gas-electric vehicles. This is guaranteed. Even automotive companies such as Audi and Nissan, which long have resisted gas-electrics, will introduce or announce the planned introduction of gas-electrics, although their engineers generally concede that fossil fuel-battery technology will do little to reduce our overall consumption of petroleum and might even present a few "downstream" environmental problems of its own. No matter. In the world of automotive marketing, reigning public perception, erroneous or not, is reality. It pays handsomely to develop cars and trucks accordingly.

¿ Product schizophrenia will remain evident at the 2008 car shows worldwide, including the Washington Auto Show, where environmental green will be the dominant exhibition theme but where the pursuit of market share and balance-sheet green will be the underlying reality. Look for all major automobile manufacturers to tout their fuel-sipping, clean-air green prowess. But also look for all of them to go after the other kind of green with V-8 and larger engines aimed at pulling maximum dollars from the pockets of consumers who remain very much in love with high horsepower and high performance.

Japanese automobile manufacturers Honda, Nissan and Toyota will be front and center among those pushing horsepower. Nissan already has entered the fray with its 450-horsepower GT-R sports coupe. Toyota is planning to answer with its V-10 Lexus LF-A. And Honda, long the greenest of the supposedly green car companies, is eyeing the introduction of a V-10 NSX sports coupe. Both the prospective Toyota and Honda super-cars reportedly will boast 500 horsepower.

Environmentalists should not be alarmed by this any more than they should be surprised by Toyota's push to take as much big-truck market share from Detroit as it possibly can. Despite the supposedly easy availability of off-the-shelf technology to make cars and trucks use less fossil fuel and spew fewer tailpipe pollutants, the truth is that it takes a lot of green to go green. And Toyota, to cite an example, has mastered the art of dealing with the devil to gain more ground in paradise.

¿ Finally, overall gasoline consumption in the United States will continue to increase. This will happen despite a borderline recessionary national economy. It will happen despite a move by some consumers to smaller cars, and despite a measurable decline in the sale of big pickup trucks and sport-utility vehicles. It will happen because irrational exuberance has a way of producing seemingly rational economic consumer behavior. It has something to do with the insatiable human desire to get more for less, or something for nothing, which, of course, is the underlying promise of the recently approved energy bill.

It promises consumers everything without asking them to do anything. They will have more energy efficient washers and dryers at attractive prices. Their light bulbs will burn longer and use less energy. Their new cars and trucks will average 35 miles per gallon, because a politically savvy and technologically intelligent Congress has forced those nasty old car companies to go to their bank of on-the-shelf parts and put them together in a way to get better mileage and cleaner tailpipes at rock-bottom prices. (Indeed, because this off-the-shelf engineering is so very easy to do, one wonders why those silly car companies didn't do it years ago and seize market advantage. Imagine, a 35-to-50-mpg, non-polluting, fun-to-drive, high-horsepower, tank-safe car replete with amenities and enough space to accommodate five people and their luggage! Who wouldn't want that?)

Put all of this together -- increased technical efficiency, cheap gasoline, the prospect of always more oil to be had somehow somewhere, and the promise of another economic boom around the corner -- and you have what we've always had, including increased vehicle miles traveled and increased consumer demand for more horsepower, faster cars, wider roads and longer, mass-transit-free distances between work centers and mini-mansions (all of those foreclosed houses will be bought by someone, albeit at substantially lower prices than the rip-off markups that helped their original buyers get into trouble in the first place).

We'll guzzle gas and recycle paper and plastic. We'll celebrate.

Happy New Year!


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