May 6th, 2008 07:15 EST
What Good Will Come from $5.00 Gasoline?
I am angry. The price of gas has really got my goat. Every time we fill up the car…well, I don't have to go into it because all of us are in the same situation, and we all know how painful it is to fill our tanks.
Rather than complaining and moaning and groaning, I've been thinking that maybe it's not all bad that gasoline prices have skyrocketed. I'm not saying that it's not bad in the short run for those of us who have to write the checks to pay for the gas. I mean that it will be good for us in the end — for the health of the United States economy, and the world in general.
Americans are among the most creative people in the world. We are people who find solutions to problems that are enormously complex. And we're going to find a solution to the gasoline crisis too. At $2.00 a gallon, nobody was very motivated to solve the problem of congestion on the freeways, or the environmental problems caused by automobiles. At $3.00, people are somewhat more inconvenienced. At $4.00, people are starting to scream. But my prediction has always been that at $5.00 a gallon, real change is going to take place in this economy — the kind of change that actually could bring the price of transportation down in the long run.
As prices go higher, people are going to act smarter. Get ready for a new way of thinking. Get ready for a new paradigm. People are going to start carpooling to work and to other places that they go — even if it is somewhat inconvenient. People will start to bundle their trips. In other words, instead of going to downtown two times on two different days, they're going to combine their activities so they go one time and kill two birds with one stone. Companies will mandate four day work weeks. People will try to move closer to their jobs. People will lean on the Internet more than ever.
Entrepreneurs and companies of all kinds will start putting out alternate fuels, biodiesel cars, and other types of transportation methodologies that haven't existed before. With low gas prices, there wasn't any incentive to invent and drive change. But at $5.00 a gallon, all sorts of alternatives will begin to emerge. The entrepreneurial flame will burn brightly. The promise of telecommuting will become a reality because people simply won't want to drive. And the good news is that our financially overburdened governments will have less pressure to build more roads. Cars will shrink in size and the number of cars on the roads will begin to disappear from our transportation system.
What about Exxon Mobil, Conoco Phillips (Unocal), Chevron, British Petroleum and the other oil companies?
I never begrudge any company from maximizing profits. But at $5.00 a gallon, people will buy less gas once they start taking the drastic measures. Lack of supply seems to be contributing to our high prices. Conversely, lower demand will reduce prices. This means that there will be less profits. Once again, the old business school story will apply. "If the train companies had seen themselves in the transportation business, then they would have owned the airlines." The oil companies need to position themselves as leaders in the energy business — and they have to do it for real. Not with a lot of lip service and TV commercials.
We voluntarily should have taken these actions starting in 1973 with the oil embargo, but unfortunately we didn't learn a lot from that terrible experience. Instead, we have pointed the finger at Detroit. We wanted General Motors, Ford and Chrysler to fix our problem by delivering us cars with better fuel economy. But it's not Detroit's job to solve the problem. Certainly if Detroit wants to stay in the car business they're going to contribute to the solution. There is a lot of financial gain available to Detroit by contributing to the solution. It is in the interest of the car makers to cooperate with the energy companies and to share the burden with consumers.
But overall, we (consumers, business owners, our governments and citizens in general) have to take responsibility for solving the gasoline crisis that is gripping our country. Now that the price of gas has become so extraordinary — making the amount of transportation costs huge as a percentage of our overall budgets – citizens will take matters into their own hands. This is when we're really going to see some significant change.
Every time Americans have been fed up, we initiate change that is great. This time the revolution will not be about overthrowing a government, but it will be about reorganizing our lifestyle choices for a better America. We may be in for some tough times in the near-term, but the long term will be so much better for all of us. We just have to manage the months ahead.
Rest assured that although paying $5.00 a gallon, which isn't very far away, is going to be terrible, the average cost per passenger to move about is actually going to come down. That is because of changes in our behavior, and changes in our expectations from our government, from our manufacturers, and from ourselves. Taking personal responsibility will make this problem go away.
I have many ideas about promoting alternatives and repositioning these critical assets. Future blog entries may reveal them, but for now, comments are welcome as are inquiries from the companies mentioned in this essay.
About Joel G. Block, President of Growth-Logic, Inc.
Often dubbed a "Growth Architect" by his clients, Joel Block advises companies on explosive growth strategies by driving revenue and sales. Well known in the capital markets, Joel is a successful entrepreneur, speaker and advisor. To bring Joel into your company, please visit www.joelblock.com or www.growth-logic.com.