Could America afford $4.00 or $5.00 gas? Would much higher gas prices send America into a double dip recession?

The impetus for a double dip recession?

Could the Big 3 survive $5.00 gas?

A few years before the 2008 gas spike this blog, along with a chorus of others, suggested the possibility of a significant oil price spike was very possible. Unfortunately, it happened.

Yet, isn’t another oil spike – and higher gasoline prices – just as plausible as then?

These days many see higher gas prices as the key to battery-powered vehicles and much needed change. Seriously though, can America really afford higher energy prices?

Let’s get real. The U.S. is bankrupt,” claimed Boston University economist Laurence Kotlikoff yesterday, echoing the sentiment of many others following recent reports by both the CBO and the IMF.

Certainly, other economists are less pessimistic; however, there is no doubt that the US economy is facing serious challenges – not just in the next few years, but through the entire baby boomer retirement.

So, what happens if tensions escalate over Iran’s nuclear program and a US warship or oil tanker is attacked in the Straights of Hormuz? How high might oil prices spike?

It was exactly such scenarios that caused the CIA and Department of Defense to claim that foreign oil dependency was the greatest risk to US security years before the 2008 spike. Almost over night, it turns out, any number of scenarios – many quite realistic – could instantly push the price of oil significantly higher.

Ironically, back before the 2008 gas spike, many in the alternative vehicle community – including this blog – hoped for such a scenario. A message, it was believed, was needed in order to achieve the kind of change that would lead to a hybrid-to-EV and other alternative vehicles revolution.

The message was achieved. The revolution was not.

Even more distressing, it’s hard to imagine that a new gas spike could lead to such a revolution these days, at least if the numerous consumer studies carried out upon the subject are to be believed, particularly in these economic times. And that’s not even the worst news. With Big 3 profits still almost entirely hedged to gas-guzzlers, particularly pickup trucks, its hard to believe that Big 3 automakers could even survive such a spike any time soon, even through the next decade.

What’s the solution?

The impetus of higher energy prices to achieve a solution seems obviously counterproductive this time around, as opposed to before 2008. Yet, higher energy prices seem almost inevitable, sooner rather than later. Hopefully, they won’t rise too high too fast.

Unfortunately, these days America’s best solution appears to be luck. I wonder what odds Vegas would put on our chances?