28 May 2012

Rising oil prices will end urban sprawl ... or not?

A popular assumption about rising oil prices is that people will have to drive a lot less and use public transit a lot more. This, in turn, will lead to greater housing density and fewer roads, i.e. less sprawl. And thus will be created the compact city—more efficient both financially and environmentally, and more vibrant in the bargain, a very good thing indeed.

But how valid is this assumption? Can those who recognize the advantages of a compact city count on rising oil prices to create it? I suspect not. People love their cars—I certainly love my old beater—and will therefore create powerful pressure to keep the cost of driving down, in which case rising oil prices may have very little effect on urban sprawl.

Consider the electric car. They are currently far more expensive to buy, largely because of the high cost of the lithium-ion battery that powers them, but as they become more popular and mass production takes over, the battery cost can be expected to drop substantially. And fuel costs are already far lower than for gas-powered cars, about a quarter as high. Industry seems convinced—it is investing heavily in the electric car. All the major manufacturers are producing vehicles with varying degrees of electrification—about 130 models in total.

Not that the internal combustion engine is about to be written off. Some experts believe its capacity to make major improvements in fuel economy, driven by increasingly stringent regulations, will suppress interest in its electric rival. In the U.S., the world's biggest gas guzzler, recent legislation will force fuel economy to double from the current 29 mpg to 54.5 mpg by 2025.

Deutsche Bank oil analysts expect that with the electric car and the increased fuel efficiency of gas-driven vehicles, global gasoline consumption will peak as early as 2015 and then "demand will be on an inexorable and accelerating decline." Needless to say, other experts disagree and expect demand will rise for much longer. Either way, it means people will still be doing lots of driving.

So those who promote the compact city should not rely on rising oil prices to sell it for them. They may be depending on a highly flawed assumption, an assumption that isn't needed in any case to discredit sprawl. The greater financial efficiency of the compact city offers lower taxes, the greater environmental efficiency offers a healthier city, and its greater vitality offers a livelier, more exciting place to live. All this should allow for a sufficiently powerful argument to convince people and their politicians that sprawl is the enemy, regardless of oil prices.

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