Rising prices fuel green motivation

By Emma Vandore  |   2008-6-14  |     NEWSPAPER EDITION

DAMIEN Barilko, co-founder of French electric bike seller Velocito, said sky-high gas prices have had more impact in persuading motorists to go green than environmental campaigners.

After doing the math, Velocito customers are prepared to spend up to 3,000 euros (US$4,600) on an eco-friendly bike to save on gas bills. Sales have doubled each year since the first store opened in Paris in 2005, according to Bloomberg News.

"We at the store are motivated by the fact that it's a clean mode of transportation," Barilko said. "But most people come for economic reasons. The ecological reasons are an afterthought."

Unlike the energy crisis of the 1970s, when the oil price spike was temporary, analysts say high energy prices could be here to stay. A sustained price increase will hit businesses and consumers on almost every conceivable level, and living with this could change global behavior for good.

"We are getting fuel efficiency and we are getting it really fast - and the government has nothing to do with it," said John Kingston, global director for oil at Platts, a leading energy trade publication.

"The power of the market is far more powerful than the government. Most people are convinced that this is not going to go away."

Month-ahead oil futures settled at a record US$138.54 a barrel on the Nymex exchange in New York last Friday - more than double the level of US$65.96 from a year before - leaving global leaders struggling to find a way to calm global jitters.

Oil will be the focus of finance ministers from the Group of Eight industrialized nations meeting this week in Japan.

Soaring crude costs combined with rising food prices have created inflationary risks not seen in years, despite the slowing global economy.

There are signs that the global appetite for oil is abating, thanks to the combination of high prices and a sluggish economy.

The Paris-based International Energy Agency predicts global demand for petroleum products such as gasoline, diesel and heating oil will grow by 0.9 percent, or 800,000 barrels a day, this year. That's down from the 1.2 percent, or 1 million barrels, the IEA forecast earlier this year.

Manouchehr Takin, an analyst at the Center for Global Energy Studies in London, predicts an even smaller increase of 600,000 barrels a day this year and says the pace of growth has been ebbing since 2004.

In the US, the world's largest energy guzzler, consumers are cutting back on their consumption of gas in response to high prices, with gas consumption falling 1.3 percent for the four weeks ending June 6 from the same period a year ago.

High fuel prices are also causing a shift in consumers' car-buying habits; General Motors Corp announced plans last week to close four pickup truck and SUV plants, saying high fuel prices have cut sales.

Businesses are restricting travel and opting for teleconferencing, as well as trying to pass increased fuel bills on to consumers.