The rising cost of gasoline is a popular topic. I’ve not seen this level of conversation since the 1970s. Everyone wants to know what and where the lowest price of gas they’ve seen. Everyone is speculating from currency, to the economy, to war.

I thought I’d add a few notes that many people are missing:

1- It’s not the speculators causing the high prices nor price spikes. It’s just that world consumption is hovering near production capacity. When a system is at capacity then any little event can send a surprisingly large ripple through the rest of the economy. Compare a drive in rush-hour traffic to mid-day. Someone spills a cup of coffee in rush hour and there is a wave of traffic jams - those ones where you finally get through the jam and wonder “why was the traffic jammed up? I expected a huge accident” - nope just a distracted driver that slowed of the accelerator or touched the brakes for a moment. That little event is all it took to basically halt a system at capacity. Or if you own or run a manufacturing plant that has some challenges, never embraced any of the tenents of Lean Manufacturing for example, then you’ve experienced how a few little things can really halt production. But it’s always fun to pin the blame of high oil prices on some nameless and evil speculator. Nope, the system is too big for that.

2- War with the oil producing areas for control is futile. There is speculation that “Iran will be next”. Perhaps, but that’s based on some common idea a war will reduce the price of oil. Reality is different. Remember, the world is at capacity already. Any little hiccup in supply (like disrupting the #4+- largest oil producing country) is like someone spilling their coffee in rush-hour traffic. It’s just going to increase the price of oil.

3- SUVs and the average consumption (forget about CAFE - it’s futile). The price of gasoline will encourage people to change the consumption of their personal transport fleet. Either fewer miles, more efficient vehicles, or submitting to less flexible public transportation (you have to wait for the bus/train). Corporate Average Fuel Economy (CAFE) standards imposed on the automotive manufacturers haven’t slowed the number of miles people commute nor the scaling up of SUVs. People have been used to driving an SUV that gets practically the same mileage as those “boats” from the early 1970s or those big cars with fins from the 1950s. About as much iron and similar construction (body of frame). Meanwhile car buyers in Europe have been purchasing smaller and more fuel efficient vehicles for years.

4- High gasoline prices are good for the United States - lower consumption trends will improve the environment, reduce the need for importing oil, and reduce or slow the growing trade deficit. These are all good things we’ve been trying to do for a while now - right?

5- Energy policy in the Norway, Finland, Sweden part of the world has been artificially increasing the taxes on gasoline to purposefully make fuel dramatically more expensive. It’s a political problem to introduce that here in the United States, but it is effective in drving positive change.

6- Evaluate the price of buying a new vehicle and your driving patterns. Prices of things tend to include the cost of energy to create them (melting a ton of steel, running 100 gallons of paint through a chemical factory, carpets, plastics, casting aluminum at 1500 degrees F, transporting raw materials, etc). If you have a SUV that gets 10mpg, gas is $4 per gallon, you drive 12,000 miles per year, and you have three years left to drive it (either when the lease ends or when you might make a switch) then you will spend only $7,200 more in fuel than buying a new $20,000 vehicle that gets 30mpg. Should you spend $20,000 in energy to save $7,200? Even if the small car had residual value with nearly 40,000 miles on it, is spending $10,000 to save $7,200 ok for your budget? Obviously simplified, but hopefully thought provoking.

7- I remember asking friends back in the 1990s what price gasoline would have to get to before they would switch out of their big pickups and SUVs. They never had an answer until I switched that to how many times they fill their tank a week and if that fill-up were $100 or $200 or more would they switch. That metric was the magic one. Most people don’t have a feeling for miles per gallon and dollars cost per gallon, but it’s easy to understand the dollars per tank.

So those are some of the things to consider for discussion at your next friends or family gathering.

Cheers!

I made a comment over on “XP era ends: Will Vista step up?” (additional content added here after the **** break). Microsoft is discontinuing Windows XP pre-installed systems to force everyone to Vista (or to Mac and Linux as the trend seems to be).

Microsoft planned for Moore’s Law… right down to forecasting what people will be using “in 5-7 years” from when they started writing Vista code. They simply overshot. The reasons?

-Web-centric. Huge computing power is not needed for most web apps where many people spend their time. The other big use with Office productivity suites are really in refinement periods now - minor tweaks but not much extra need for power. So no consumer push other than the minority of gamers (that push graphics cards more than cpu’s), and fringe video or movie creation/editing. Look at the popularity of the ASUS Eee pc - it’s way underpowered for Vista, probably crawls under XP (but works well under Linux).

-Hardware Marketing Fog. The chip makers stumbled over the last few years with Moore’s law - they had to put gangs of cpu’s together to try and get back on Moore’s course rather than vastly more powerful singles. Most software has yet to be specially (re)written to use parallel processors. So hardware marketing is a confusing fog of brand terms (look at a Sunday advertising insert) trying to convince people to get a new computer. It’s confusing enough that many people give up and go to the Apple> store - since there is a very limited selection.

The fix for all this?

-Rescope Vista, make smaller incremental improvements more frequently (look at the release cycle for Ubuntu.. major improvements every six months). Don’t call them “service packs” but rather “improvement packs”.

-Slim down Vista. Find out how to make it run “more like XP” until hardware catches up again. Brand it “Speedy Vista”. Or put an easy to configure “turbo button” where a user can run with eye-candy or super fast by “downshifting to pass”. This includes refusing to allow hardware vendors (and MS itself) from packaging bloated advertising/trial software with new systems.

******

Microsoft made a mistake in overshooting hardware capabilities that would be available and that customers wanted/needed. Getting back on track will be difficult with Microsofts corporate system - they are not geared for what is going on in the industry. It’s much like the domestic US automanufacturers struggling against Toyota’s Lean Manufacturing system. Toyota was setup to build in small batches with continuous improvement. Much like Canonical Ltd does with Ubuntu Linux.

Ubuntu is launched on a six-month improvement cycle. Meanwhile, the production system at Microsoft is geared to produce a wonder every five to seven years.

When your forecasting needs to look five years out compared with six months out, you are bound to make larger errors that are more difficult to correct.

So a challenge. Figure out how to make incremental improvements in your process and your company. Think small, light, and quick. If you want some pointers, give us a call.

Cheers!