But Wait, There's More - Natural Gas, Water and Other Increasingly Scarce Resources

Implications: We are mesmerized by the present high price of oil, but that's only a part of the picture.  Natural gas and coal prices, water scarcity and a steadily declining large household base will essentially spell the beginning of the end of the housing, vehicle and development sprawl.

Analysis: The LA Times article is a good primer, but easy and convenient focus on the cost of a barrel of oil is only the beginning of the change in resource scarcity that will require the real estate industry to drastically change, or perish.

Natural gas, the primary energy source of home heating and hot water, remains well above $10 per million BTU's and is likely to stay there, as cheap supplies are drying up, and the fundamentals of far more costly imported liquified supplies or any shift to transportation (if Mr Pickens has his way) will make this energy source eventually unaffordable, especially to large, leaky homes built on cheaply acquired land at the end of long commutes.

This natural gas scarcity will impact fertilizers and pesticides that nourish the relatively vast monoculture lawns that householders will find increasingly untenable to maintain, especially after paying the gasoline, heating, water and electric bills.  Global demand for energy has made coal a universally fungible commodity, also being pulled upward in price, which is taking uranium fuel along for the ride.

Any significant growth in fossil or nuclear power plant construction will also result in more and more water required to cool these behemoths.  Water is essentially being mined from aquifers with many, like the Ogalala in the Great Plains, approaching the point of collapse.  The problem is exacerbated in the West and Southeast, which has until recently experienced the largest population growths along with attendant amenities of McMansions, SUV's and vast lawns where hardscrabble existed.  Electricity costs around the nation and world have been rising 10-15% a year, with the US average above ten cents a kilowatt hour for the first time.

One resource that has not increased are large, affluent households that could afford the status quo of 2,500 square foot or larger ranches miles from anywhere.  Average household size has been dropping for years, despite immigration, legal or otherwise.

What this adds up to is that large houses far from transit or town centers surrounded by broad lawns will become increasingly unviable.  The present housing value collapse and growing unemployment will require the real estate and building industry to do one of two things.  Build smaller, greener and closer together, or perish.