Wednesday, July 18, 2007

2011: The year American life changes

When will energy costs in general, and gasoline costs in particular, fundamentally change the way middle-class Americans live and work? We know gasoline prices will rise until something changes, even if the US never implements a carbon tax.

Of course change like this is not generally abrupt, it's a process and it's probably underway now. So, really, what I'm asking is when will the change be obvious and undeniable?

I think a reasonable marker is the year that the baseline gasoline price hits $5 a gallon. I used to think it was $7 a gallon, but that was before I paid attention to what my commute was costing me. If the average American burns 3 gallons of gas during each daily roundtrip commute, and gas costs $5 a gallon, then each daily commute costs $15 in gasoline alone, or about $3,000 over 200 commuting days. For a family with two commuters that's $6,000 a year.

That's a meaningful percentage, perhaps 10-13% of the average American family's after-tax income. It doesn't include the effects of cost increases for heating and cooling, lights and computers, and all the rest of our lives.

That's a number that a middle-class American will start to notice, and it can't come out of savings. Middle-class American's don't save -- their assets are in their homes. Americans will have to change their behavior. It means smaller cars, hybrids, bicycles for some, closer employers, working at home, etc. Employers will have to change their behavior, setting up peripheral offices at transit hubs, investing in remote work support and collaboration solutions ...

The 'working at home' bit is particularly interesting. I've been in distributed work groups on and off for years, and they're terribly ineffective for complex or innovative product work. We get far more done with less money when everyone sits in walking distance; but it's getting harder, not easier, to get people to relocate and stay relocated. Of course part of the problem is that employers have not seriously thought about how to make remote work groups effective (hint: technology is an enabler, it's not a solution). Commuting costs of $15 a day and more mean that employers will have to get very good, fairly quickly, at supporting remote work groups.

So when does it happen? I'll pull a number out of the air, extrapolating from my amateur chart and the Copernican Principle, and guess, even without a carbon tax or the complete collapse of Iraq, that it's 2011.

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