The next casualty of the oil depletion age: state universities

It is an unfortunate fact for canaries, at least, that these birds are particularly susceptible to methane and carbon dioxide. For that reason coal miners used to bring them down into the mines as an early warming system for monitoring the air. When exposed to even small amounts of these noxious gases, the canaries would show signs of distress and wobble on their perches; if the gases were concentrated enough, the birds would fall over and expire. Either way, it was a sign to get out.

In the business world there are some “canaries” that are already wobbling on their perches as the age of oil depletion unfolds. The airlines are the most visible and obvious casualties since their fortunes are so closely tied to the price of jet fuel. The American automobile industry is another prominent casualty. This is in large part because the industry failed to anticipate the emerging energy crisis and continued to concentrate on manufacturing gas-guzzling SUVs. In addition, the automakers’ high pension and health care costs have made them especially vulnerable to financial shocks.

Now, a third important casualty is coming into view: state universities. As with each of the other “canaries” already mentioned, state universities have particular vulnerabilities that make them more susceptible to rising oil and natural gas prices than their private counterparts. First, the “Demographics Project” of the College Board (the organization famous for SAT tests) reports the following:

For almost 20 years, enrollment managers have had the luxury of being able to recruit, select, and help finance their incoming freshmen from ever larger high school graduating classes. Those good times are about to end. Future applicant pools will be smaller and will vary across demographic lines.

Second, state funding as a portion of higher education budgets for state universities and colleges has been trending down from 44.8% in 1979-1980 to just 32.3% in 1999-2000. This trend is leading to a third vulnerability: sharply rising tuition and fees as shown on the right side of the graph below:

Energy Bulletin