

Is the Internet Increasing or Reducing the Demand for Oil?

By Dennis D. McDonald

I am puzzled by the seemingly robust nature of the US economy and the lack of a melt-down due to runaway gasoline prices. I still remember the inflationary hardships caused on the 1970’s by rapid rises in crude oil prices and the inflationary spiral that priced so many people out of the housing market due to huge rises in interest rates.

Why do economic conditions seem smoother now despite massive trade imbalances, crushing federal deficits, and an unending commitment to costly (in terms of blood and money) foreign adventures such as Iraq?

Is it the Internet?

Back in the 1970’s the Web, eCommerce, and social networking were just science fiction. Today you really CAN replace the use of your car with a trip to the keyboard in an increasing number of instances.

It’s not just the buying of books, records, and airline tickets that’s affected. New businesses have been invented and their reach has grown globally, not just locally.

Businesses now find it possible to sell to and service customers in personalized ways that were not possible in pre-Internet days. Terms such as “customer intimacy” have come into vogue as an indication that the tailoring or products, services, and relationships is now possible as a normal part of commerce. In many cases, business relationships are entirely electronic and exist outside the face-to-face world.

Does this mean that machines are replacing our friendly neighborhood greengrocer and are pressuring a reduction in our day to day demand for gasoline? In the absence of data, I can’t answer that question, but I can see the logic of such a hypothesis.

It’s not just businesses that are taking advantage of technology for managing and personalizing vast numbers of customer transactions and relationships. Technology is also enabling the formation and management of vastly increased numbers of social relationships through social networking technologies that allow people to discover and communicate – electronically, not physically -- with people who share common interests of all types.

I’m not saying that all of this is positive. The privacy issues are very real. The Web can also be used as a tool for political oppression and censorship. But as relationship development and commerce continue to flow to the web, it is inevitable that personal travel patterns will be impacted. The question is what is the nature of that impact?

If the impact is that communications and electronic relationship management reduces travel demand, that will reduce demand for oil.

An alternate hypothesis is also possible. As it becomes possible to develop and maintain an increasing number of relationships electronically, the net impact might actually be to increase the number of people we want to eventually meet face to face.

I’ve noticed that in my own professional networking over the past year I have increased the number of professional colleagues and friends substantially due to my personal involvement in a variety of web based networking activities.

Now I am eager to meet the people that I only know as a picture on a web page or as an email address. So maybe I will end up using more gasoline after all!


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