[NOTE: This post is part of an ongoing series (which started here) through the next few months whose purpose is to provide tangible examples of what our future might be like in a world where we will no longer have available to us the quality and quantity of fossil fuel energy sources as we have long been accustomed to possessing and using. Some examples will describe significant impacts beyond the most obvious one: less but more expensive gas to power our vehicles.
Other posts will describe routine aspects of daily living that will likely change when producers of goods and services no longer have inexpensive and adequate supplies of the fossil fuel resources they need. I’m certain that the questions I raise will in turn raise other concerns as well. It is only by acknowledging the consequences affecting each of us that we can begin an intelligent national process of planning and implementing new methods of providing the goods and services we’ll need or desire.]

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A few weeks ago, I came across an article about several California small businesses which were being adversely affected by rising gasoline prices. As the story noted, small businesses are responsible for creating more than two-thirds of all jobs in this country. Any price hikes in gasoline are sure to affect almost all of them in one way or another … and that’s probably not a good thing.

One business featured in the story was a San Francisco-area carpet cleaning service. One of the owners expressed her growing concerns about the steady increase in those prices, since the significant added expenses were interfering with expansion plans she’d been hoping to implement this spring in light of a slight surge in demand for her services.

Businesses will suffer from increased costs for transportation as do individuals and families. When any of those consumers see price spikes in what they view as “necessities” (and are presumably not operating with an unlimited budget), some other piece of their budgetary pie is going to be sacrificed as a result. For you and me, a full tank of gas this week which winds up costing an extra couple of dollars over last week’s total may not seem like such a big deal over the course of a year … some weeks the prices will be higher, other weeks perhaps not. (In all likelihood, we’re past the point where we ought to be expecting substantial and/or regular decreases in pricing, unless of course we’re all fortunate enough to fall into another recession….)

So let’s say that after twelve months of semi-regular price increases, maybe we’re now spending $200 more than we did last year for the same amount of fuel for our vehicle. (The U.S. Department of Energy, however, is now estimating that these recent price hikes will cost the average family $700.00 per year. Not an insubstantial amount for those living paycheck to paycheck—if that.) More than one vehicle in the household, and the ding to your wallet is a bit more pronounced. If that were the extent of the impact, then on balance it might be manageable—but that’s an optimistic stretch. Of course, it doesn’t end there.

If our transportation costs are increasing, so too are the transportation costs of most other businesses and service providers. Few will absorb all those increases on their own out of the goodness of their hearts, and so that means prices across the board are inching up, too. (One obvious example important to everyone is the price of groceries. Most foods and beverages are shipped, and that means a lot of companies handling the deliveries are seeing their expenses increase. It doesn’t end there, either. The dominoes tumble quickly up and down the supply chain.)

But for a business like that carpet-cleaning service with its eight trucks and equipment which are all powered by fossil fuels, it’s not just a few extra dollars each week. The owner indicated that her gas expenses had increased a not-at-all insignificant 32% in January of 2011 over her costs a year earlier. With even higher prices in February, that math was not likely going to make her feel any better when it came time to looking over the monthly budget for her business. None of her options were encouraging: don’t hire new employees, pass on the costs to her customers, or refrain from purchasing new replacement vehicles.

Those choices have consequences. If she doesn’t hire new workers (and let’s not even consider the negatives to those who may have been counting on employment there), expanding her business will be more challenging. If she doesn’t expand her business and thus attract more revenue, and fixed expenses are increasing, the bad math results are easy to compute. At some point, the ongoing prices increases will force her to make other painful decisions. If prices level off, she can be sure that in the not-too-distant future, the availability of gas sourced from a steadily-declining supply base will have the same effect. Perhaps she doesn’t reach that point for a year or two or five, but the interim period will not be pleasant.

If she passes on the costs to her customers, there will come a time when at least some of them will have to decline her services, because they and their businesses or employers will be dealing with the same set of problems, and soon enough they’ll be making some sacrifices as well. And if her customer base shrinks, it’s not rocket science to see how that affects her, her family, and what she is able to spend her business revenue and net income on. Guess what happens to those businesses she frequents either for supplies to maintain her own company, or those establishments she relies on for personal reasons (clothing stores, hairdressers, etc., etc.)?

Of course, this series of cascading problems is not unique to an economy in the throes of gas price increases. It’s what happens in any recession, and it’s also what happens when a particular industry or two suffers shortages or price hikes for one reason or another. Most of the time, however, some semblance of fiscal equilibrium is reached in due course, and “business as usual” is once again the norm.

But with Peak Oil, the return to business as usual should not be counted on. At some point, price increases because of declining supply and ever-increasing demand (let’s keep in mind that there are a few billion people on this planet quite eager to experience their own version of prosperity just like all of us “wealthy” Americans have been enjoying for several decades) are going to hit a wall, or ceiling, or both. Most of us are simply not going to be able to afford ever-increasing prices, and it’s difficult to wrap one’s mind around all the changes and consequences which that eventuality is going to lead us to. (Plans, anyone?)

It’s just as realistic to expect that at some point, regardless of then-current prices, we may all be dealing with restrictions on availability of one kind or another, so affordability may prove irrelevant. You may be able to afford the $7.69 per gallon price that your sister or neighbor or son cannot, but if your city’s gas stations have reduced their supplies by X percent, what you can or will agree to pay won’t matter as much.

The third option our carpet-cleaning business owner may be contemplating as her fuel expenses eat up more of her budget is to simply not replace her equipment and/or the vehicles she relies on to travel to her customers. They won’t be bringing their hardwood floors or wall-to-walls to her office, so what happens when more and more repairs to her vehicles are needed? Safe to assume that those vehicles and machines are not equipped with protective bubbles which prevent wear and tear over time, so at what point do those types of repair expenditures become prohibitively expensive? What then? No good options, it would seem. Plans?

Do you see any significant differences in the types of problems your own home or business delivery service company might find itself dealing with now or soon enough? If you don’t own such a business, what about the home services you rely on? Appliance repair? Landscapers? Your own carpet-/floor-cleaning needs?

What are you going to cut back on when those providers are passing along their higher fuel prices on to you? Are you okay with those changes? Inclined to start mowing your own acre-plus yard because the landscaper will be charging 2 or 3 times what they did a couple of years back? Easy enough to take your malfunctioning refrigerator to your local or perhaps-no-longer local repairman? The list is limited only by one’s imagination.

We’re all guilty of taking a great many things for granted in our daily living. Talking about a carpet-cleaning service is one of only scores of similar services we don’t give much thought to in utilizing their services regularly. Peak Oil is going to change that.

Plans, anyone?