Maybe it's not a "spike"...

Many people of experience and knowledge have been totally wrong about oil prices. First of all, we are struggling with the China-India-Brazil-Russia appetite for raw materials. But oil has defied those who saw a sharp drop as US consumption headed south. They forgot it's not all about us anymore. F'rinstance, here's Michael Swanson, noted economist for Wells Fargo and frequent ag meeting speaker last October (2007):

Even if Chinese growth were to slow, it doesn’t appear that OPEC would allow prices to fall significantly below $60/barrel. Given the current lack of excess capacity in the global petroleum market, OPEC should be able to manage price control with relatively minor supply cuts, which will not cause the cartel undue stress. The only real threat to OPEC is a major economic recession reducing demand more than they are willing to cut supply. Since the old joke is that economists have successfully predicted 10 of the last 3 recessions, there is always someone predicting a recession at anytime. However, a recession does not appear like a good bet in the next year, which means that oil prices will stay in their current range of $55 to $75 a barrel for the next couple of years. [More]

Now compare and contrast with this sobering scenario:

Increasingly tight oil supplies will continue to push the price of oil
higher with the cost of crude hitting US$150 a barrel by 2010 and soaring
to US$225 a barrel by 2012, forecasts a new energy report from CIBC World
Markets.

This will result in skyrocketing consumer gas prices in the U.S. with
the national average price easily topping $4.00 this summer, reaching $5.50
in the summer of 2010 and hitting close to $7.00 by 2012. [More]

And some analysts think that's optimistic. Regardless of who you put your money on, it would appear consumers are already reaching the tipping point for changes in energy consumption. Take the cherished SUV as one example.

As gas prices pass $3.50 a gallon nationally and the economy teeters on recession, independent used car dealers like Hoyos and massive chains like AutoNation Inc. are having trouble selling used SUVs as buyers prefer smaller, more fuel-efficient vehicles likes hybrids and crossovers (CUVs). Crossovers such as the Ford Edge, Honda CR-V, and Toyota RAV4 have more interior room and more rugged styling that the average car, but with a lighter chassis and generally better gas economy than an SUV.

Used SUV sales in March were down 14 percent nationally compared to last year, according to data compiled by CNW Marketing Research. That follows drops in used SUV sales of more than 8 percent for the first two months of the year, compared to the same months in 2007.

That trend has sent used SUV prices plummeting, giving owners a shock when they try to trade theirs in and find out how little they can get. [More]

If the SUV folds can monster pickups be far behind? While farmers everywhere would sooner part with their faithful dog, I'm seeing more careful choices and strategic compromises. We'll keep the monster 4WD pickup, but just use it for pulling NH3 tanks and serious stuff. We'll run around the farm in a four wheeler, or even a used mini-truck from Asia.

And when gas hits $7, we'll walk all the way to the shop from the house.

And what will happen to suburban sprawl?

Given the supply constraints, he says the U.S. will have to rethink suburban sprawl, bringing an end to strip malls, big-box stores, and other trappings of the automotive era. Kunstler, 59, predicts a return to towns and cities centered around a retail hub—not unlike his hometown of Saratoga Springs, N.Y. But the shift to this new paradigm, he says, will be painful. (Kunstler could be off the mark; he predicted technological Armageddon after Y2K.) BusinessWeek writer Mara Der Hovanesian spoke with Kunstler about suburbia, which he calls "the greatest misallocation of resources the world has ever known." [More]

Even if we tell ourselves (and anyone who will listen) we saw this coming, we are still woefully unprepared, I think. I know I am, but Aaron and I are rethinking our long-term strategy incorporating sky-high fuel, fertilizer, land, rent, and seed prices.

Right now, it doesn't look exciting.