And this would have to compete agianst ugrading the heavy oil using methane as a hydrogen source. Underlying the loss of asphalt is the fact its now cost effective to upgrade heavy organics and soon coal using hydrogen.

So it looks like sooner than later rural roads will degrade. The population along the road cannot afford to maintain it.
Property values along this now gravel road will plumment and so people will move closer in.

This movement of people into incorporated areas with a larger tax based will cut the throat of the county tax structure since you have in a sense a reverse tragedy of the commons taking place lets call it abandoning the commons. This leads to lower tax assesments in the county areas and somewhat higher tax base in the cities.

Sure at some point the density is high enough to cover the costs of roads but suburbia is dying in the process. And understand this inward migration is of people that have basically lost everything as their property devalued so they are not going to cause major increases in the tax base.

Finally I don't disagree that there are expensive choices, I just am pointing out that I think that suburbia is now toast. Local governments are the bottom feeders of the tax pyramid and they are the first that will be unable to handle the squeeze of higher road costs and collapsing economy.

Or course for the US the real problem is a lot of our wealth is tide up in these far flung rural mini farms and suburbs.

I think the recent  rise in the price of oil coupled with the housing bubble precipitated events its not just peak oil but the two together make suburbia no longer tenable.

And back to California and its bonds and road spending. California will eventually default and file bankruptcy. The state just made a huge mistake.

I thus think I understand how America will crumble.
Continued economic recession and rising road building costs will together cause crisis after crisis as increasingly larger government entities default on bonds and go bankrupt.

How many places can afford asphalt that's 5-10 times more expensive than today ?

Expensive asphalt won't save the day here. And no government has the balls to stop supporting the road structure and flip over to electric rail they will simply bleed to death.

This gives another indicator to watch thats a lot easier to follow than trying to follow individual bond issues and road construction. We just need to look for a rise in bond defaults by local goverments since eventually that is in my opinion the big initial effect of peak oil.

The upcoming housing crash is going to really hurt tax revenues, the avg. CA house tax is something like $1000 a month! 10 grand a year, it's up there. I think a lot of home-0wned would love to have taxes of only $5k a year....

So, as this all crumples like the zones on a Volvo, tax revenues in CA are going to plummet.