Just a small observation: This past month I drove a circuit of over 2,000 miles from Missouri to the east coast in Virginia and back by way of Ohio. One of my own measures of economic activity over the years is to observe the level of container truck traffic on the interstate highways: Significant economic downturns, I've found over the years, are usually accompanied by a lessening of the truck traffic, in particular. Even with fuel prices at record highs, traffic of all kinds, but particularly that of trucks, was heavy on most highways I traveled. Lot's of stuff and people continue to move around.

So far I've not read of any significant decline in traffic at the ports. Apparently the increase in fuel costs is being successfully absorbed or passed on; i.e. the recent inflationary uptick, probably reflects this in part. China also seems to have benefitted from expanding regional trade to augment its surplus with the US. Their increasing presence in Central and South America might mean that they're also following in the footsteps of others. They have a lot of capital to invest and the California housing market casino has closed for the time being.

More planned use of transportation by individuals and business resulted in the recent significant drops in oil usage that were reported. There's still a lot of slack to be taken in before the bite of higher energy prices is really felt. I've been waiting to hear that people are being forced to cut back on their cell-phone usage: when I hear that locally or see it reported in the news then I'll know that things are dire, and I'm not going worry too much until then. :)

It's only prudent that business assume high fuel costs, the downward trend is pushed by the deflation of a short-term bubble and the strengthening of the dollar: that too will end. China and India and their need for growth and energy won't disappear.

It's fascinating to watch as the public, even in the rural area I live in, adjusts. More and more Priuses, and believe it or not, more and more scooters are to be seen. I honestly think that the public, even here in pickup truck country, is more than ready for the various alternate fuel vehicles projected to come on line - even if fuel prices continue following the current downward trends. If adoption is as extensive as I suspect it will be, higher fuel costs will be one factor but not necessarily the most important. I won't surprised if it comes as much in reaction to the accumulation of events of the last decade or so. Folks in these parts are not particularly happy with the rest of the world at the moment. A bit surly, maybe?

Plenty of reason to be pessimistic on oil for the short term. I keep reading that the ECB is expected to lower interest rates in the face of the European slowdown. Also read somewhere that there remains some dirty laundry yet to be aired relative to the ongoing mortgage mess. Bears are lurking everywhere, I suppose. :)


Speaking of petrol prices: Petrol today is $3.39/gal.US locally, and diesel, if I recall correctly, is more than $1 more. Diesel has been $4+ for at least 6 months or more. They are projecting petrol prices to dip below $3 by fall and into the winter months. Natural gas and fuel oil prices are expected to spike this winter. I will not be surprised to find petrol prices settling in at around the current price by spring and then slowly moving up. I'll be surprised if we see $6/US gal. anytime soon. I've long thought that the $5/US gal will be the psychological barrier that once broken will trigger the most change. We're away from that but getting closer and I get the sense that people are feeling it. Hybrids of all kinds, but particularly those by Toyota and Honda are very popular here, but supplies are limited. You have a situation where some used Priuses are selling for more than new ones: some people want them that badly.

I'm surprised to hear that autos with diesel engines are so much more. I just assumed that diesel was more or less the standard in Britain and Europe as a whole. It certainly isn't here in the States. Diesel engines were such a bust in the 70's and 80's that they've never recovered here. I haven't really thought that much about the fuel costs relative to the total cost of ownership. Now I'm curious. However, I suppose I'm surprised that, even for used autos the relative cost of fuel is low; of course at fewer than 10K miles, maybe. But, London is an outlier in costs, I know. How people manage is beyond me. And, there is no way that I would drive into that city: Just too much traffic, too little parking, and public transport that is much too good.

I've not seen the pretty places. I like the thought though. Best of luck in setting yourself up nicely.

"(Leaded) Gasoline prices in 1960 averaged 31.1 cents per gallon. Median family income in 1960 was $5,620. In 2006 (the most recent year for which we have reliable data), median family income stood at $58,407. If the price per gallon were the same percent of median family income in 2006 as in 1960, the 1960 price would translate into $3.23 in 2006. Unfortunately, the (median family income) data aren’t yet available for calculations applying to 2007 or 2008."

This was taken from an entry in the CATO-at-liberty blog. Very interesting! It explains to me why I see most people taking the current prices very much in stride, particularly when you consider the fact that the relative cost of nearly everything else, but in particular of essentials, has much declined since the 60's. This reinforces my suspicions that a price above $5/US gal. would be a break point.