What if gas cost $10 a gallon?

[Dave19642006]

What if gas cost $10 a gallon? - MSN Money this is the article, check out the money calculator on the right but around the third paragraph

In four years, U.S. gas prices have doubled to more than $3.70 a gallon, and crude oil has tripled to around $125 a barrel. Allowing for inflation, that's higher than prices were during the 1978–83 oil shock that triggered a recession and sky-high interest rates. But . . .
What if gas cost $10 a gallon?

Thousands of truckers would go bankrupt. Airplanes would sit idle in hangars. Restaurants and stores would shut down. Car-pooling, hybrid vehicles, scooters and inline skates would swing into vogue. And telecommuting, rooftop vegetable gardens, home cooking and recycling would proliferate.
Yes, it would be painful. At $10 a gallon, filling a Ford Explorer could cost $225. Even gassing up a Honda Civic could set you back $132.

Here are some likely effects:

• Consumer spending on eating out, clothing, electronics, vacations and other little luxuries would fall sharply. A Nielsen study found that even at recent gas prices, 41% of consumers were eating out less. In total, 18% of those surveyed were cutting spending to a "great degree." That would bruise companies such as Applebee's, Macy's, Gap, Best Buy and others. But discount retailers, particularly those selling food and gas, could do relatively well. Think Costco, Wal-Mart and McDonald's.

• We'd see "a lot of parked planes," says Bill Swelbar, an air transport engineer for the Massachusetts Institute of Technology. The U.S. airline industry pays out $465 million in fuel costs for every $1 rise in oil. At $350-a-barrel oil, the industry would pay more than $100 billion extra, almost as much as last year's total airfare sales. Even if airlines ratcheted up fares 50%, half of their airplanes would be grounded because they'd be too expensive to fly, Swelbar reckons.

• Many independent truckers, who pay for their own fuel, would go bankrupt as their costs soared and shippers switched to barges and trains. Taxis and FedEx would be strictly for the well-heeled. And home pizza deliveries would cease. Pizza delivery drivers also pay for their own gas. "It'd be brutal," says Joseph Miller, an assistant manager at a Domino's Pizza in Seattle. "I would think we wouldn't have any drivers."

• Food prices could jump by a third or more, experts estimate. About 80 cents of the $4.50 retail cost of a box of cornflakes goes to transport it, says Dan Basse, the president of AgResource, a Chicago research company. On top of that, there's the cost of fertilizers to grow the corn and diesel for farm equipment. In 2005, transportation and energy made up 8.5% of all retail food costs, but energy was far cheaper then. As $10 gas pushed up food prices, pinched consumers would give up pricey fresh meat and vegetables for cheap pastas and oils. Ranchers and dairies with energy-hungry milking barns would struggle. And cities might sprout to life as people planted vegetable gardens on their roofs and balconies and in vacant lots.

• Plastics for appliances, packaging, pacemakers and myriad other products would jump in price as the natural gas that plastic is made with rose in value alongside oil. Bill Wood, the president of Mountaintop Economics and Research in Massachusetts, says shoppers would have a choice: "Paper or paper?" Small plastic bottles of water would disappear. Glass and metal containers would make a comeback. And recycling would explode. Families might even have nine bins in the hall to separate their trash, as they do in Japan, where consumer recycling tops 90%.

Thank god its not $10.00 a gallon

[superdorf]

I don't think that would happen... At least not for many years... the market would plummet and prices would drop because people actually would stop buying as much.

[keepngoal]

They said the same thing about $2 gas a long time ago and I think $3 gas about 7-8 years ago.

doom and gloom sells ads on TV, Print and websites.

[jl112481]

Personally, if gas were to hit $10 a gallon, I would expect that people would buy electric, hydrogen, or diesel cars to run off bio diesel. I don't see people paying that much for gas unless inflation warranted it. The trucking industry would find some way of intergrating biodiesel into their tanks. All in all it would spark a huge movement for alternative fuels/energy.

[jdoggivjc]

We'd be drilling our own oil by that point. The reason why we don't drill more of our oil right now, aside from environmental protection groups, is because through most of the late '80s, all of the '90s, and the early part of this decade it was less expensive to just buy the oil from OPEC than to drill it ourselves (thus why pretty much all of the oil fields in southern Illinois were shut down and capped in the '80s). It makes no financial sense to drill your own oil when you can buy it cheaper than it costs to extract it. However, with gas going well over $100/gal, if we haven't reached the point yet where OPEC's price exceeds the cost of drilling our own oil, then we are quickly reaching it. It's hard to say whether OPEC really even cares about whether we're drilling our own oil now as China has become such a huge consumer and it appears they'll pay almost any price for it, but that becomes yet another reason to drill our own oil - we can sell our excess to China at a high price and, hopefully, increase national income.

[CyinCo]

$10 gas won't happen. Or if it does, not all other things will be equal. Even now, at close to $4 gas, new technologies are being developed at all times. You can't just assume that gas prices would change that much and nothing else would. Things would change and adapt driven by the gas pricing. I've been saying for years now that high gas prices are not a bad thing. It makes people think. It drives innovation. It is the impetus for change that is required to reduce the consumption of oil in this country. In the short term, the costs are something people need to deal with. In the long term, it is exactly what the country needs to find better solutions.

[mj4cy]

We'll see people spend more on hybrid cars than spend that much on gas.

[Cutlass]

My dad's an independent trucker. If diesel goes up to even 6 or 7 a gallon, he'll be losing money by driving his truck. He'll be better off parking it.

At over 4 a gallon he's getting squeezed really hard.

[Clone9]

All we hear about is Alaska, but are there other areas within the US where we could drill for oil without disrupting such pristine nature areas?

[Cybone]

I understand that the Dakotas have a great deal of oil there. There is huge amount of oil in Colorado, unfortunately it is all around shale and extremely difficult to drill.

[CyinCo]

I think increasing drilling and supply is treating a symptom of the disease but not the disease itself. We need to reduce demand, not find a way to get more supply.

[delt4cy]

When price/barrel gets up in the higher 100's the same thing will go for Canada's massive oil tar fields.

The Canadian tar fields will become profitable to extract oil and if/when it comes to that, Canada will potentially be one of the largest producers of oil. (I think they already are but their influence will become much greater)

Then on the other hand, China's growing demand for oil will probably cancel that out and we'lll be right back to where we are heading now.

[CyinCo]

When price/barrel gets up in the higher 100's the same thing will go for Canada's massive oil tar fields.

The Canadian tar fields will become profitable to extract oil and if/when it comes to that, Canada will potentially be one of the largest producers of oil. (I think they already are but their influence will become much greater)

Then on the other hand, China's growing demand for oil will probably cancel that out and we'lll be right back to where we are heading now.

Is this where they squeeze the oil out of a sandy soil?

[jdoggivjc]

All we hear about is Alaska, but are there other areas within the US where we could drill for oil without disrupting such pristine nature areas?

A huge reserve has just been "discovered" in the Dakotas, Montana, and Minnesota. The fields in southern Illinois are still there, just been shut down since the '80s. There's offshore drilling in California and the Gulf Coast. Of course, there's still Oklahoma and Texas. We have the supplies and the ability to drill it. We also now have the proper motivation to do so with the price per barrel being so high. We just need to stop letting the environmental groups hold us hostage because some rare insect that lives in the area might be endangered as an example.

[jdoggivjc]

Then on the other hand, China's growing demand for oil will probably cancel that out and we'lll be right back to where we are heading now.

Yeah, but in this case, if we're one of the exporters, money will be coming INTO our economy instead of it just flowing out.