Will High Oil Prices Derail Charlotte Projects?

[monsoon]

My! Everyone disappeared at once. Are all of you out filling your tanks?

While I am not a prophet and have no idea what will happen. One scenario for very high gas prices is that it will also put a big damper on downtown construction. It's an unfortunate fact that 3 decades after the oil shocks of the 70s our economy is highly dependant upon oil to keep running. So even if you don't drive much, such as myself, this situation is going to effect everyone if it persists.

For example, oil is needed to transport building materials, groceries, packages, and everything else a modern city needs to exist. Expect that prices will rise on all of this. A major project like the Vue is going to cost a lot more to build because the energy needed to put up something like this is mainly comes from oil as does the transportation of labor to the site. A huge spike in cost might derail a few of the proposed projects.

Along with this once inflation takes hold, because oil affects the cost of everything, interest rates will rise as well. (they have to to keep the banks profitable) The increase in rates will limit the ability of people to pay the prices they are currently asking for high priced property in Charlotte. No buyers, no projects. When this happened the first time in the 1970s, I was a young teenager living in Myrtle Beach, and a number of highrise projects under construction, just stopped. They couldn't even afford to take the cranes down and they remained for several years. One was even named the Myrtle Beach Christmas tree.

High gas prices are an inconvience for people that have to commute, and they will learn to deal with it, but it is the less obvious effects that might cause a lot of trouble in the long term for everyone in Charlotte. I wish we had not forgotten the lessons that were learned in the 1970s.

What do you think?

[Norm2]

This extreme surge of gas prices is supposed to be "temporary" so I dont think anything under cponstruction now will just completely stop. Now buildings that are being planned is another matter.....but lets all hope for the best!

[UrbanCharlotte]

Personally I think this fiasco will be over in around two weeks. Sure the prices will be sky high and we'll be running out the next two weeks but at least our houses are standing unlike people in Biloxi and such. They have it much worse than we do, but it will all start getting better in a few weeks.

[DigitalSky]

I think no doubt it will affect Charlotte since SO much relies on gas. And as you mentioned, with Charlotte being the 2nd largest banking center it will also affect us in that way and it could quite possibly derail some of the projects.

[RiverwoodCLT]

I think it will speed up the condo market, near large retail area like South Park and uptown.

This is a problen of refiniery process shortage, not crude oil shortage. As the refineries come back on line, you will see a drop in prices. It takes a while to get a refinery back on line. Now we know pipe lines are down. They must get back in operation.

I have been in refineries in Beaumont, Port Arthur, Nederland and Houston Texas.

So I know a little what I am talking about.

[DigitalSky]

Thats a good point, it might speed up retail, mixed use that may be in higher demand due to people wanting more pedestrian-oriented housing rather than car-dependant

[MZT]

Whatever happens with oil prices, it will make The Park will sell out in record time!! heh.

[Seabreeze]

I just remember a huge recession after September 11th that derailed several highrise plans uptown and left the pink building unfinished for a while.... do you all not see this event causing a recession of any kind?

For example, weren't there some major businesses headquartered in NO? And it was one of the biggest ports into the USA in that area... now ships can't even get through bc large slabs of Interstate Highway are blocking the ports (esp. around Biloxi)

This is as epic as the tsunami... casualties will be significantly less due to the evacuation, but the area affected isn't too much different from what NPR says, and cnn, and BBC... its just a lot more consolidated than the tsunami... instead of a kilometer of coast on bordering courntries being destroyed, we have a 300 mile stretch going many many miles inland destroyed..

[NcSc74]

It all depends on how us, the consumer will react. I agree it would speed some of the more affordable projects. If I had the oppurtunity to buy close to where I work then I would. Granted if there was a viable mass transit alternative. I think this will give LRT a mandate on why it is so important. I hope the city leaders will take this and run. Integrated mass transit can be a catalyst for Charlotte if they jump on it now instead of wondering what to do about gas prices.

[peaceloveunderstanding]

well the markets have remained somewhat calm so far, some one with a little more expertise can probably explain.

[ElricSeven]

I used to live in SW Charlotte down by the lake. My commute from down there would now be costing about $300 per month in gasoline at the cost today. I live Uptown now and burn less than a tank a month, and even that is optional. Parking here is now about $180 for the spots in my building. That's a pretty strong incentive to buy a place Uptown.

Look at Europe where fuel prices have been this high for decades. That is what you'll see start to happen here with an emphasis on public transportation. IMHO.

[monsoon]

Actually Paris and other French cities are suffering from extreme suburbanization. Urban planners are looking at ways to convince people, who are looking for a detached house with land, to stay in the city. 2/3rds of metro Paris is no longer in an urban setting. This is being repeated in other parts of Europe as well.

[TennBear]

A few thoughts:

1) The port of New Orleans is closed. Normal traffic on the Mississippi is slowed, if not stopped. The normal flow of goods has had to be rerouted.

2) A number of barges on the river sank taking down all kinds of goods. Food stuffs for the most part.

3) Rail and truck lines will have to be altered and will increase costs.

4) There was already a shortage of construction supplies. Concrete and Steel have been rising in price partly due to shortages and China. These are going to get worse with the rebuilding of the Gulf Coast.

5) The constuction workers that would be working elsewhere will be in the Gulf to help with the rebuilding.

Costs for all your goods are going to rise. There will not be the money to be able to keep up with inflation. There will be shortages and the costs of construction will make many projects no longer cost effective. Some places construction will stop or be curtailed.

[A2]

I think this situation is MUCH different than the 70's Oil Crisis. We are dealing with a situation in which Gas prices WILL go down. Not to mention the fact that we are not even close to the high interest rates we faced in the late 70's. As a matter of fact we are at nearly 45 year lows. (hence the Housing boom)

Once refineries are back on board expect Gas and Oil futures to drop. And drop BIG! There are already signs that once Labor day is behind us and re-construction efforts begin to gear up, then the price of Gas WILL drop. We are playing this up more becuase that is how the media works. It is all about drama. Granted Prices will be very high in the SHORT TERM, but once capacity is restored, there will be a move back to normalcy.

Another point to ponder is what will the FED do, in light of the recent Trauma that the US is dealing with. My speculation is that he will hold off on rate hikes. Plus whenever there is a war, natural disaster, or any other type of calamity the economy does not go into a tail spin, in fact, it prospers.

With Federal monies poised to be delivered to the ravaged area, and construction to begin at a rapid pace, thier will be jobs available.

As for a possibility of construction slowing in Charlotte, I think that is a bit much. I firmly believe that Charlotte will continue its building boom and tower cranes will continue to litter our skyline.

One thing to note, concerning the strength of Center City (alongside the residential boom going on), is the incrediblly low vacancies. As a matter of fact Charlotte is well under 7% in its office vacancies, making it the number one city in the US for the lowest vacancies. This alone will only spur more development in that sector.

Not to mention with office to condo conversions going on (ie 230 South Tryon), as well as apartment to condo conversions happening (ie Fifth and Polar), center city is losing a ton of rental units. Guess what that means??? More apartments. More construction, and more towers.

I think once everybody calms down and things can be better assesed, the country will be ok. This includes Charlotte and its continued growth in center city.

God bless the USA and the people who make it what it is ! We will be OK !

B)

A2

[monsoon]

I think this situation is MUCH different than the 70's Oil Crisis. We are dealing with a situation in which Gas prices WILL go down. Not to mention the fact that we are not even close to the high interest rates we faced in the late 70's. As a matter of fact we are at nearly 45 year lows. (hence the Housing boom)

<{POST_SNAPBACK}>

The high rates came from the high inflation due to energy costs. We are just at the beginning of that curve. My advice to anyone looking to close on a loan in the next year or so is to go ahead an get a loan lock.

[A2]

The high rates came from the high inflation due to energy costs.

[monsoon]

The 15% mortgages did not come until the 80s, well after the short term shortages that we had in 1979, and the high prices that we had in 80 & 81. I'm not suggesting that 15% mortages return, but if they rise back to their average of 8% over the last 45 years, then it is going to easily cut the available people who can afford to buy a place downtown by 2/3rds.

Another point to consider. A significant portion of Charlotte's economy is devoted to the wholesale distribution business. We are 6th in the nation just behind Chicago. This is a business that runs exclusively on oil and is highly dependant on the pricing of oil. Sustained shortages and high prices are going to hit this section of our economy pretty hard.

Freightliner on Monday, laid off 200 people from their truck assembly plant here in the metro, citing high fuel prices as being the cause.

[A2]

The 15% mortgages did not come until the 80s, well after the short term shortages that we had in 1979, and the high prices that we had in 80 & 81.

[atlrvr]

Certainly anyone who works for Freightliner will disagree but we are trimming up for a stronger region. It's better for us to gradually shed jobs that will eventually be lost anyway, rather than to wake up one day and find out our entire economy is obsolete (Detroit).

I compare what has been going on with the Charlotte region to an excercise routine. Trimming the fat and gaining muscle......much healthier and attractive than going in for massive lipsuction where all the fat is removed at once and you're left with flabby skin.

[A2]

I compare what has been going on with the Charlotte region to an excercise routine.  Trimming the fat and gaining muscle......much healthier and attractive than going in for massive lipsuction where all the fat is removed at once and you're left with flabby skin.

<{POST_SNAPBACK}>

What an analogy atlrvr !

[monsoon]

If you notice the spike in 1974 in interest rates. That was from the 74 shortages caused by the Arab Oil Embargo. Then when the shortages occured again in 1979, we again had an interest rate rise. However the prices did not go back down for sevaral years and interest rates remained pretty high thoughout much of the early 80s. That list of interest rates directly proves the correlation between oil prices and interest rates.

It should be noted that it is just this week that we finally hit the price of gasoline in 1981 (when it was its highest) once adjusted for inflation. Except the rise occured much faster this time. The 50 cent rise we had in the last 2 days, took more than 6 months to happen in 1979.

[monsoon]

Certainly anyone who works for Freightliner will disagree but we are trimming up for a stronger region.  It's better for us to gradually shed jobs that will eventually be lost anyway, rather than to wake up one day and find out our entire economy is obsolete (Detroit).

I compare what has been going on with the Charlotte region to an excercise routine.  Trimming the fat and gaining muscle......much healthier and attractive than going in for massive lipsuction where all the fat is removed at once and you're left with flabby skin.

<{POST_SNAPBACK}>

Last time we did this "Trimming the fat and gaining muscle" we ended up with East Charlotte.

[A2]

If you notice the spike in 1974 in interest rates.

[A2]

We just broke 4.0% on the 10-year treasury. Bonds are in rally mode and rates are plumeting to 3.90's%. A 30 year mortgage RIGHT NOW will cost you a whopping 5.26% and a 15 year mortgage is at a mind blowing 4.86%. This is some of the lowest rates we have seen this year.

A2

[monsoon]

It is always spiked by govenment inflation numbers. That hasn't happened yet. We do however have one differenc now that did not exist in the 1970s. The Chinese. The communist government of China has been making massive purchases of US Bonds. That is one of the reason that rates are where they are at the moment.