This could indicate a fundamental shift in the oil economy with higher prices from this point onwards. With the rising middle classes in India and China the adoption of the automobile will naturally increase. This will be a 20 – 30 year trend and by that time oil reserves will be dwindling. Add to that industrial consumption increases globally and there are a number of factors there that could conspire to part you from your SUV and invest in clean energy.

And Dave, it’s not just Boulder where people are talking about it. Had an interesting discussion with a conservative South Texas MD yesterday – he and his friends are parking the pickups and SUVs, trying to sell them now.

Back on topic: Of course the price of gas is driving companies already in dire economic straights into bankruptcy. I am specifically thinking of Delta airlines and a couple of shipping companies. I don’t know if this is a good thing or bad, but I would believe that in the short term, it is absolutely bad.

Alternatively, it could get more people out of their cars and onto bikes which would be a good thing for just about everybody involved including the auto industry right now.

It seems to me that higher gas prices will cause people to use less gas…simple economics. Isn’t that a good thing? If the impact of higher pump prices is that people buy fewer huge SUVs, start to buy hybrids in serious quantities, and automakers finally come out with fuel cell vehicles, that will put us on a better long-term path, no? Everyone (at least in Boulder) whines about how we use so much oil and we’re running out and we’re polluting… well, the only (free market) way to stop that is to have higher prices!

The cycle we have been in since the early 70s is as follows: (1) we increase our use of oil over time, (2) our dependence on foreign oil imports reaches some critical point, (3) there is a price shock [that's where we are now], (4) we reduce our use of oil for a time.

Note, by the way, the interesting impact on pump prices. How can it be, that gasoline prices are only about double, when the price of the oil has gone up 4x? Two things — first, the oil is of course not the only input cost: refining and transportation contribute significantly. Second, gasoline taxes are a fixed amount per gallon, not a percentage. Prior to the price shock, gas taxes were half or more of the price of gasoline at the pump. So if it was $1.20 before, and the price of the actual gasoline triples, you’re really only looking at $0.60 + 3 x ($0.60) = $2.40 (the current price of gas).