Friday, May 16, 2008

oil prices, bikes, and life in Los Angeles

well, it was bound to happen given the continuing surge in oil prices. the rise in fuel prices is apparently driving a rise in bicycle sales...and not just in the U.S., where the increases in gasoline costs have been a shock to most Americans and their monthly budgets, but around the world.

check it out:
if the link doesn't work, i'm including the full text of the article below.

of course, any statistician will tell you that correlation does not mean causation. but i have to say that based on what i'm seeing here in Los Angeles, this relationship is entirely plausible.

the last time i filled up the gas tank (which was yesterday), the price here in South Pasadena was $3.95 per gallon. and now the story on the news is that they're speculating the cost may go up to $6.00 per gallon by the end of the summer, especially if crude oil approaches the $200 per barrel number that some economists are speculating.

these numbers aren't anything new to people outside the U.S. i know friends and family in Europe who have lived years with petrol prices equivalent to $4-5 per gallon (and now, worse, given the weak U.S. dollar). ditto for people i know in the Asia-Pacific region.

but for Americans, who've never seen these kinds of numbers, it's a real stunner. particularly for people commuting in cities like Los Angeles, it's been difficult, since the long drives typical of so many suburbanites (anywhere from 20-80 miles 1-way) translates into triple-figure weekly gasoline bills. let's just say people are being forced to really evaluate the value of driving in their SUVs, luxury sedans, muscle cars, or even just driving in general.

the result has been a trend towards less driving. local news has been reporting noticeably less congestion on L.A. streets and highways, even during rush hour:
apparently, people are using more mass transportation, or looking to alternative modes of travel.

for me personally, i'm all for it. i've always been appalled at the level of traffic in Southern California, and the paltry state of public transportation here, especially compared to the European cities (or even other American ones) of my youth. i've always insisted that Los Angeles has no idea how good a mass transit system can be, simply because they've never experienced anything like the subways, railways, and bus systems in London, Paris, Berlin, Amsterdam, Copenhagen, etc., etc.--and just how much investing in construction of a mass transit system is worth. i keep saying this, but i'll say it again: Los Angeles is in a Catch-22, where people don't use public transportation because the system is too inadequate, but the system is too inadequate because people don't use it enough for government to justify investing in it...well, i guess now there's an external factor that may shake up this conundrum, and maybe ridership on the mass transit system will rise enough to pressure government to finally start investing in it.

i also hold these same sentiments with regards to alternative transportation on bikes. there's just too many things and too many occasions that can be accomplished on bicycles around here (i.e., quick errands to the grocery store, or bank, or post office, etc. etc.) that would otherwise be a waste of gasoline and traffic in a car. and the benefits to personal health and the environment would be so much better with less use of cars. again, the Catch-22 in Los Angeles has been that people don't ride bikes because it's too inconvenient and dangerous, but the reason it's too inconvenient and dangerous is that there are too few bicyclists to represent themselves against the greater number of drivers...but again, given the cost of gasoline, maybe now people are feeling the pressure to make decisions they ordinarily would not have made, and finally start looking at bicycle transport.

as for me, i'm all for it. where's my bicycle?

As fuel prices climb higher, so do bicycle sales
By Ralph Jennings
International Herald Tribune
Wednesday, May 14, 2008

TAIPEI: The row of gleaming bicycles being assembled on the factory floor of Giant Manufacturing, one of the biggest bicycle makers in the world, will soon hit streets from Seattle to Beijing.

Rising fuel prices, a growing awareness of environmental issues and the popularity of cycling as a recreational sport has fueled a rise in demand for bicycles around the world.

Giant, the maker of international bicycle brands like Boulder, Yukon and Iguana, is reaping the profits. The company, which produced 5.5 million bikes in 2007, expects to pull in $1 billion in sales this year, up 10 percent, it says.

Giant's story is typical of the $61 billion global bicycle industry, which is enjoying unprecedented growth as cycling becomes a major recreational sport and lifestyle option in many Western countries.

"There is a general renaissance and interest in bikes," said Jack Oortwijn, editor in chief of the monthly magazine Bike Europe. "Parts suppliers are struggling to keep up."

Mainland China leads the world in the number of bikes produced per year with about 73 million units of a total 100 million annually, according to the Earth Policy Institute, an environmental information network based in the United States.

The rest come mostly from Taiwan, Canada, Russia, Ukraine and the European Union. Taiwan makes about six million bikes per year and they sell for an average domestic wholesale price of $222 per unit, according to a local manufacturing association.

Bicycle sales have increased by 14.6 percent over the past five years among European Union nations, which buy 70 percent of the bikes worldwide, according to Bike Europe. In the United States, sales have increased by almost 9 percent in the same time period.

But it is not all good news.

Price hikes in metals - especially steel, aluminum and chrome, the main metals used in bikes - have cut into profits and pushed up prices as manufacturers seek to maintain margins.

The key to greater margins is high-end bikes built with carbon-fiber frames, which earn higher margins per unit because they sell on brand cachet as well as quality, offsetting steep raw materials costs.

"If you want to compete, you've got to raise efficiency," said Giant's president, Tony Lo.

Giant, which is based in Taipei, also manufactures battery-powered bikes that are popular in mainland China, where the company operates three factories. Battery-powered bikes are a big hit as China's economic boom helps provide more money to even the poorest factory workers, who almost immediately upgrade their bikes.

Chinese consumers snapped up more than 20 million battery-powered bikes in 2006. The bikes, powered by a 36- or 48-volt battery, can travel at around 25 kilometers, or about 15 miles, per hour. They sell for around 3,000 yuan, or $430.

Giant's crosstown rival, Merida Industry, expects profit to be flat this year due to rising material costs.

But Merida forecasts that revenue will rise 5 percent to 10 percent this year from 2007, roughly meeting analyst expectations, on growing demand for battery-powered bikes in China and mountain bikes in sports-driven markets like the United States.

Taiwan competes with France, Germany and Italy in the high-end bike arena.

In the push to increase margins and win market share, Giant and its main competitors - Cycle Europe in Finland, and Trek and Specialized in the United States - are racing to develop the world's lightest bike.

Giant is in the lead with a bike that weighs 6 kilograms, or 13 pounds, 20 percent lighter than earlier models, according to cycling experts. Called the TCR Advanced, these carbon-fiber ultra-light bikes sell for about $7,100.

But Giant, with its competitors close on its heels, is working hard to develop an even lighter bike.

With oil prices at record highs of $126 per barrel and some analysts predicting they could hit the $200 mark, it is no surprise that bicycles are becoming a popular form of transport, especially among a growing breed of fitness fanatics.

"Driving cars is expensive nowadays. Oil prices are going to remain at a high level," said Fabian Kuster, a spokesman for the European Cyclists' Federation in Brussels.

For short-distance commutes, he added, "a bike is faster in the city and takes up less space."

Paris, Barcelona and other cities in Europe have introduced bicycle loan programs that allow commuters to pick up bicycles at stands outside train stations. All that is needed is a swipe of a credit card to guarantee the bike will be returned.

Users return the bikes to the stands and with another swipe of their credit card get their deposit back minus a small fee for use of the bike. There are about 20,000 such bicycles at around 1,450 stands across Paris alone.

"With bikes you don't need any gas, so there's a new awareness of cycling," said Giant's president Lo, 60, who rides 80 kilometers, or 50 miles, to and from work every day on his bike.

Europeans increasingly pedal to work on bike-friendly streets planned by city governments that encourage cycling, while a growing pool of commuters in China use battery bikes and Americans ride mainly for sport or to work off calories.

"I have been racing mountain bikes for a long time and would like to think that cyclists like myself increase bicycle sales," said Steve Tam, an avid cyclist in Redding, California, where riding bikes on the weekends is a favorite recreational sport.

Would-be riders in newly developed regions like Taiwan still see bikes as a symbol of a poor past, while riders complain worldwide of inclement weather, unsafe traffic and rampant theft.

Still, cycling is cost-effective and often relatively fast on Taipei's congested roads. "I've got just a 10-minute ride, and you don't need to spend any money on gas," said Hu Li-wei, a student.

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