The price for a gallon of gasoline plunged noticeably over the weekend. Maybe it was just my selection of gas stations, but I paid about $.40 less Sunday per gallon of premium on the way home from a funeral in Florence, S.C., than I paid Friday on the way down. It sure would help the ol’ wallet if the price of gasoline backed off even more.
But I’m not counting on prices to ever drop back to the $2.80 average price of a year ago — which now seems blessedly low. Either are American consumers, who are switching to fuel-efficient cars on a scale not seen since the “energy crisis” of the 1970s. A sign of the times: Home-town used-car company CarMax, took massive write-downs on its national inventory of trucks and SUVs because the market price for those vehicles had collapsed 25 percent in just the previous three months.
Americans, Europeans and the Japanese may be conserving gasoline, but not everyone is. The Washington Post has a fascinating article this morning about the phenomenal increase in automobile traffic in China. Not only are more Chinese driving than ever before, they’re driving bigger cars, not smaller. China just may represent the last growth market for General Motors’ Hummer behemoth anywhere in the world.
Fifteen years ago, China had very few privately owned cars. Today it has more than 15 million. The Chinese government, which is stimulating domestic demand to balance the nation’s export-led economy, wants its citizens to buy more cars. National and provincial governments have subsidized the price of gasoline — it costs only $3.40 per gallon — cut the sales tax on cars, improved the availability of bank loans, and built a massive road and parking infrastructure to accommodate more vehicles. The Chinese, who regard automobile ownership as a sign of modernity, are obliging by buying more.
Here’s the scary part. The increasingly affluent Chinese are moving out of their urban high-rises into suburban-style suburbs “with spacious villas and two-car garages, big-box chain stores, strip malls and office parks.” Like American human settlement patterns, these new Chinese communities are totally dependent upon the automobile.
On, there’s one more scary part: Only four percent of the 1.3 billion Chinese people own cars. The other 96 percent represents latent demand. As it is, China accounts for 40 percent of the global increase in demand for oil as. There are no signs that the nation’s appetite is slackening.
Meanwhile, in India, home to a population of one billion, demand for gasoline is growing 20 percent annually. This year, the combined consumption of China, India, Russia and the Middle East will increase 4.4 percent and for the first time exceed that of the United States, according to the International Energy Agency.
Bottom line for Virginia: Barring economic upheavals in China and India, demand for gasoline will continue to increase globally, even as global oil production has peaked. Supply and demand assures that the current lull in petroleum and gasoline price hikes is only temporary. A transportation system built for cheap oil no longer makes sense. We can no longer afford Business As Usual.
(Hat tip: Nova Middle Man.)