Guest Post: Is RV Nation at Risk?

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

A reduction in retirees' disposable income coupled with a global rise in the price of oil could crimp the assumptions underpinning RV Nation.

RV stands for "recreational vehicle," but it might also represent much of America's rural economy, which is heavily dependent on recreation and large low-mileage vehicles.

On a recent 10-day, 2,700 mile camping trip through a major chunk of the West (Northern California, Nevada, Idaho, Montana, Wyoming and Utah), I noticed a great many empty buildings in the small towns of the West. (This does not include the favored recreational haunts of the top 5%, of course, such as Sun Valley and Jackson Hole, which are booming.)

I also observed that much of the local economy in many areas was based on recreation: fishing, housing and feeding visitors to state and national parks, boating, etc.

Nowadays, a mainstay of these recreation-dependent sectors is the large cohort of retirees with the time and disposable income to travel. While some travel in sedans and stay at motels and inns, a significant percentage travel in large RVs and stay in RV parks or campgrounds.

In less prosperous times, for example the 1960s, most families camped in tents, as this was the most affordable way to see the Great American West. Relatively few could afford a trailer (RVs were largely unknown at the time), and most trailers were of modest size and appointment.

Nowadays, RVs are often large and luxuriously appointed–at least when compared to the modest trailers of the old days (not to mention tent camping). Pickup trucks have also grown in size and power, and an entire new class of large vehicles–SUVs–are now more common than conventional sedans in many areas.

In the conventional view, this reliance on large, low-mileage vehicles and recreational pursuits of the retired class is welcomed. After all, America's new surge of energy production means energy for low-mileage vehicles will be both abundant and cheap for decades to come, and the burgeoning class of retiring Baby Boomers will fuel an expansion of recreational travel.

I am circumspect about these rosy assumptions for a number of reasons. One is that I recall smaller, less lavish vehicles of an earlier era that consumed less fuel per passenger than today's SUVs and oversized pickups, many of which generally have one occupant, and outsized RVs, many with only two occupants.

In other words, neither recreation nor travel require high energy consumption vehicles, yet we have collectively chosen costly, high energy consumption vehicles as the default setting for all but the poor or thrifty (a vanishing breed, by the look of it). One looks in vain for small pickups of the sort that were common in the 1970s in vehicle manufacturers' offerings.

Given that much of the new-found energy is natural gas and not oil, and given the dependence of the U.S. vehicle fleet on gasoline, it seems a bit premature to assume that the current surge in domestic energy production will guarantee an abundance of cheap gasoline for decades to come.

Domestic natural gas (natty) is priced much lower than natty on the global market, but oil is priced (with some variation) globally, which means that domestic oil production will be priced on the global market, not the domestic market.

That means that any global shortage or supply disruption of oil will push prices higher in the U.S., regardless of any relative abundance of oil domestically.

Lastly, as recent entries have shown, the notion that the number of full-time workers can continue stagnating while tens of millions of additional retirees draw benefits from pay-as-you-go Social Security and Medicare is financially impossible.

A reduction in retirees' disposable income coupled with a global rise in the price of oil could crimp the assumptions underpinning RV Nation.