All Changed

Yesterday I felt myself lucky to find gas at $4.71 a gallon for regular in downtown Los Angeles, as the prices I've been seeing in recent days were $4.85 and up. I wonder how nostalgic this post will make me feel when I read it a year from now.

Many consumers are in panic-reaction mode, trading in SUVs for hybrids and trying out mass transit for the first time. Auto manufacturers are racing to switch factories from large trucks to smaller, more fuel-efficient vehicles. And businesses are struggling to cope with skyrocketing transportation, energy and raw materials costs.

This year's run-up in oil has many causes, some of which are short term -- such as commodities trading speculation and the fall of the dollar -- and therefore potentially reversible. In that way, this period is not unlike the oil shocks of 1973 and 1979. But the unfavorable supply-and-demand equation is not reversible; certainly not in the short term. Higher crude prices may bring new supplies on-line, and the pain at the pump may even overshadow environmental concerns to open up largely controversial deposits such as ANWR and off-shore oil. However, none of these will put more oil in the pipeline tomorrow, and they will not offset rising demand from growing economies in Asia.

What we're witnessing, then, is a disruptive event, one which will shape the future of business, economies and global politics for decades to come. The United States is in a rather weak position to respond to this new environment, as we've allowed decades of opportunity to slide by like so much oil sludge. Our petroleum reserves are not large enough to feed our hunger, we've engaged in wasteful practices and we're borrowing hand over fist to pay for our conspicuous consumption.

All of that presages a painful adjustment to the new circumstances we're faced with. We're already seeing that pain. Car buyers have lost tons of trade-in value on now-unwanted gas guzzlers. Businesses are seeing profits squeezed and many are experiencing a sales slowdown as well. The U.S. economy is teetering between recession and inflation, and we may get the unlucky combination of both in the months ahead.

When faced with a seemingly insurmountable problem, it's always wise to tackle the biggest obstacle first. In America, fully a quarter of our energy consumption is devoted to transportation.  In many ways, that's due to the geographical size of our  country and our active business and leisure economies. In other ways, it's due to gross inefficiencies that have been allowed to develop over recent decades.

Our antediluvian air traffic control system wastes countless flight hours and countless gallons of jet fuel.  The legacy air carriers' hub-and-spoke system was designed to enable them to serve smaller markets economically; today it is an inefficient and costly business model. Suburban sprawl contributes to wasteful land use, traffic congestion and global warming. Vehicles have gotten far safer, far less polluting and far more efficient, but size and horsepower wars have negated some of those advantages. And decades of neglect and hostility have left us with a weak, struggling rail passenger network incapable of stepping up to the demands of an oil-squeezed economy.

Consumers and businesses will try to make do, but they could use some leadership from Washington. Our transportation infrastructure is outdated, costing the U.S. economy billions of dollars in wasted productivity and direct costs. As Newsweek's Fareed Zakaria points out, "U.S. spending on infrastructure as a percentage of GDP is the lowest in the industrialized world today." That's not how we became a great nation, and it's certainly not how we will stay a great nation.