Book Review: "$20 Per Gallon" by Christopher Steiner

Sunday, January 24, 2010

I just finished reading the book, "$20 Per Gallon: How the Inevitable Rise in the Price of Gasoline Will Change Our Lives for the Better," by Forbes Magazine writer Christopher Steiner. I have really mixed feelings about his book.

First off, I've got a major problem with the phrase, "inevitable rise in the price of gasoline." True, it's more likely than not that oil and gasoline prices will rise in coming decades, but it's not "inevitable," and certainly not to the degree that Steiner believes. For instance, the latest Annual Energy Outlook by the U.S. Energy Information Administration projects that motor gasoline prices will rise by 0.7% per year from 2008 through 2035. This will take gasoline prices, in constant $2008, to $3.91 per gallon in 2035. That's certainly more expensive than gasoline costs today, but it's nowhere near "$20 per Gallon," let alone a civilization-altering event. In fact, if EIA's forecast is even close to being accurate, then Christopher Steiner might as well just end his book after the Prologue, which assumes $4 per gallon gasoline. Beyond that, the rest of the book's gasoline prices -- $6 per gallon, $8 per gallon, all the way up to $20 per gallon - are extremely unlikely to occur, at least according to EIA (or the International Energy Agency, which projects crude oil prices in constant dollars of $115 per barrel by 2030, implying gasoline at $3.75-$4 per gallon in two decades).

Perhaps unsurprisingly, the author's assumption that gasoline prices will rise rapidly and inexorably hits a road bump almost from the beginning of the book. Thus, on page 19, we have Steiner quoting a forecast that gasoline will cost "$7 a gallon by 2010." Well, we're in 2010 now, and last I checked, we weren't even close to "$7 a gallon." Whoops. More broadly, the concept that gasoline prices will ever hit $20 a gallon, or anything close to it, is - to be blunt - utterly ridiculous. In fact, long before gasoline hits $20 per gallon, countervailing economic forces will kick in, slashing demand, increasing supply, and otherwise "equilibrating the market" at a price far, far lower than $20 per gallon. Hence, the forecasts by the US Energy Information Administration and the International Energy Agency of around $4 per gallon gasoline by 2030.

Second, while I certainly hope the author is correct that our society will transition smoothly and peacefully to a totally different energy economy, I am skeptical. Given that this book was written in 2008, the author was more likely watching the rise of optimistic "hope" and "change" Barack Obama as opposed to the rise of angry "tea parties" and other manifestations of intense populist rage. In the event of $8 per gallon, $14 per gallon, or even $20 per gallon gasoline, something tells me that the author's breezy vision of an "exhilarating" future ("a World War and its inherent technology revolutions - minus all the death") may not quite work out that way.

Third, I'm not exactly sure how or why the author decides that particular changes will take place at particular price levels. As a reviewer says on
...the book is largely anecdotal rather than analytical. It makes it an easy and engaging read, but doesn't do much to make the author's case. Remind me again why WalMart will be eliminated at $14 (or was it $12) but not at $8 or $16? He had a number of points to make, and seemingly spread them among random chapters.
I agree with that criticism and wish the author had been more rigorous in his methodology. As it is, I'm never really sure why the author decides that a particular gasoline price level triggers a particular sequence of events. The book would be a lot stronger if he made that clear.

Finally, having said all this, I do find the book to be worthwhile and would recommend it as an intellectual exercise, if nothing else. No doubt, the topic the author writes about is an important one. It's also a subject that's well worth thinking through in terms of its myriad implications. Which is exactly what the author - an engaging and entertaining writer with a lot of interesting information to share, as well as an enthusiasm for the subject which can be contagious - does in "$20 Per Gallon." For instance, I found it fascinating to read how our "food web" will be "deconstructed" and then reconstructed along completely different lines. Same thing with the ways our cities will be reborn, our exurbs will disappear, gasoline-powered cars will be replaced by electric vehicles, high-speed rail will replace airplane travel between U.S. cities, wasted heat and energy will be captured and used, power plant efficiency will skyrocket from a pathetic 33% to twice that level, as many as 50 million homes will be powered simply through "capturing waste heat just at the U.S. manufacturing level", nuclear power growth will explode (not literally - heh), food will be grown locally, etc, etc. My guess is that many of these changes will start taking place -- in fact, some already have - at gasoline prices far lower than $20 per gallon.

In the end, after reading Steiner's book, the main question on my mind is not so much whether dramatic change in the way we power our world is coming. Instead, it's more whether we'll get ahead of the change through smart, proactive policy, or whether we'll be reactive, kicking and screaming all the way to a different energy future. Unfortunately, watching the complete dysfunctionality of our political system regarding complex, long-term questions like this one, my guess is the latter more than the former. Either way, this book helps us think through the issue, and for that alone it's well worth reading.