The LA Times has an interesting article on the hit fuel prices are handing small businesses. Makes sense, particularly if your work has a roving component (gardener, pizza delivery, etc). Nevertheless, this strikes me as quite a non-story. Gas prices are higher, but not that much higher. We're dealing with an increase of around 30 cents a gallon (at least here in the Southland), seems to me that small business has larger fish to fry, it's just the LA Times that didn't.

It will, on the other hand, be pretty fascinating to see what happens when oil becomes really expensive, $4 or $5 bucks a gallon. Considering the lifetime costs of that, you're likely to see a lot of investments in new, more fuel-efficient capital. That means everything from hybrid cars to window insulation to white paint for your roofs (did you know that if LA painted its roofs white it'd save about 1,500 megawatts of power on cooling, or about 3% of California's Summer load?) to thicker copper wires (retain electricity better). Little changes that make a huge lifetime difference.

This is the sort of thing we did during the OPEC shock in the 70's, and we tore OPEC apart with it. Fuel-efficient cars (through CAFE standards), regulation mandating more efficient air conditioners, and so forth were all forced to market, all did better jobs than their gas-guzzling forebears, and all contributed to lifetime savings and profit increases for the companies involved. But we did our job too well, and Saudi Arabia decided OPEC had lost and so they flooded the market with super cheap oil, thus ending all need to conserve. And so we stopped conserving.

Oil prices aren't so high now that we're being forced to act responsibly, but they will be soon. And then it'll be interesting to watch us rise to the challenge -- many of these investments can be a long-term boon for small businesses, not to mention the economy as a whole. During the California energy crisis -- a man-made one -- there was an enormous scramble to bring more power capacity online. Huge amounts of money were invested, power plants forced into operation, and so forth. But by the time they hit the market, their capacity was no longer needed. Why? Because Californians had cut their power usage by 10% in a matter of months. They had created their own extra capacity and lowered fuel costs. So I'm not too worried about the small businesses -- today's bitching to newspaper reporters is tomorrow's conservation and capital investment. And we need that to happen.

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