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Conserving our way to higher prices

May 8, 2008

Following the drought, Raleigh, NC has been under water restrictions. The restrictions have reduced the volume of water used by about 20%, and the city’s utility revenue along with it.  Since the infrastructural costs to support the utility, largely born by the revenue aparantly contain a significant fixed cost base that doesn’t scale downward with the reduced usage, the city is facing a funding shortfall.  The proposed solution?  Increase usage rates.

So people use less, and pay more.   And, with the continued economical development in the area, new users will continue to be added, and the total usage is likely to continue to grow despite the belt tightening measures asked of the individuals.  In the case of a monopoly, the usual marketplace forces on supply and demand don’t seem to work as one would expect to maintain the price.

This led me to wonder about our energy policies as well.  One present focus is to use less fuel, to drive less, to increase efficiency standards for new vehicles, etc.   Given the oil and gas industry is an effective monopoly as well, I believe the price per gallon will continue upward regardless of demand.  I also believe that some external forces will be applied to limit the upward movement and prevent total economic collapse. 

Water, air, land, energy, all these resources are finite, and the truth is that an increasing population demands increased usage.  Efficiency breakthroughs only serve to increase the number of people the system can support.  They do not fundamentally change the basic equation.   I’m not arguing against improvements in efficiency, as they do buy time and forestall the inevitable.  However…

I believe the truth is that we must move from a policy of growth to one of sustainability and equilibrium.    The sooner we collectively understand and make this shift, the better individual quality of life can be preserved in the system.


3 Comments leave one →
  1. May 8, 2008 2:31 pm

    Coincidentally I was having thoughts on similar terms. We have a rural strike down here in Argentina. To make a long subject short: Government puts high taxes to exports to get money and try to keep internal prices low. The rural workers don’t like this because they loose a big chunk of income due to the international high food prices.

    We’re in the verge of a food crisis on a global basis. Who thought Biodiesel and Ethanol where great ideas? About 6 months ago I shared some thoughts on that with good old Jim L. and we agreed that it is not a good solution; land, as you state , is a finite resource, and if land usage has to compete between energy and food we’ll be in deep trouble.

    I am believe in Utopias and I know that we are smart enough to get our collective act together and find solutions to our problems. Lets just hope that everyone realizes it is time to get responsible and think in terms of a global town and not just the eternal “me, myself and I”

  2. May 8, 2008 8:45 pm

    My take is that, the rising costs will cause a break to new technologies. It didn’t make sense to do ethanol financially 10 years ago. Adding a few thousand to the cost of a car to improve fuel efficiency didn’t make much sense when gas was only $0.70/gallon and average gas usage would be $3640 over 5 years (assuming 20/gal per week).

    I expect in technology in the solar and battery sectors to be able to move us off oil dependency for fuel, which will dramatically drop the cost of oil. Drastically evaporated demand won’t support massive increase in price once there is a reasonable alternative. In the past, the oil companies recognized this very clearly, but today they seem to be greedier, and forgetting the new competition that they are creating.

  3. May 10, 2008 12:16 am

    How quickly can we get from 6.5 billion people to 2.0 billion?

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