Sometimes, or I should say oftentimes, I sit and contemplate where I will take my next vacation. I could sail across the island of Curacao, ride elephants in India or visit the Petra in Jordan. I begin anxiously searching deals, receiving fare alerts from Kayak and asking friends to join me when reality sets in.
I can’t afford a vacation. In fact, I can barely afford to fill my gas tank and I have a hunch that I’m not the only American in this position.
It turns out that I spend more on transportation than I do on clothing, healthcare and entertainment combined! As a matter of fact, in 2011 American households spent a record average of $4,000 on gasoline, 8.4 percent of their total income.
The $4,000/year we could be saving on fuel could cover that dream vacation and leave more money at our disposal. However, the lack of robust market competition and affordable alternative fuel options drain our savings and continue to force you and me to pay outrageous prices at the pump.
In addition to the transparent transportation costs, we also pay indirect costs as businesses pass along higher transportation expenses caused by rising oil prices. Airline fares are one example. When oil prices increased to $100 a barrel in 2010 and 2011, airline fares increased by 12.1 percent, making my dream vacation even more expensive.
The worst part is that global demand will only drive oil prices higher. Last year, worldwide demand for petroleum grew by 2.3 million barrels a day to 88 million barrels. China plans to move 50 million people to the city each year over the next decade, creating massive demands for fuel. Similar urbanization trends are underway in India, Africa and throughout the developing world.
What does this mean? The price of oil will continue to rise, causing economic hardship, and impeding our way of life unless cheaper alternative fuels are made available.
“When oil gets much more expensive some biofuels” become more cost effective, Economist Ken Goldstein said. “We are able to make that switch today.”+