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<< The time for high gas prices is now... | Home

It's great to be echoed...



I love this article, it echoes my thoughts from yesterday about how high gas prices are a wonderful thing (yes the article is nine months old, but I just saw it for the first time, and it's still valid):

http://www.slate.com/id/2140613/

To add to what I said, it's not just high gasoline prices that we should be hoping for, it's high ENERGY prices.  I'm sure this is obvious to most people, but I'll state it anyway: the higher the price of energy, the less people will use.  I've communicated with Jorge Carrasco, the superintendent of Seattle City Light (Seattle's electricity provider), and he claims to understand that, yet Seattle's mayor Greg Nickels continues to pat himself on the back for lowering rates, despite having a reputation as a leader in the environmental movement.  

 


Posted On Friday, January 19, 2007 11:43 PM
Filed Under [ all the other stuff ]

Comments

Gravatar # re: It's great to be echoed...
Posted by Scott Miller on 1/20/2007 3:05 AM
High gas prices don't decrease consumption unless the price rises exteremly fast (like right after Hurricanes Katrina/Rita). Basic economic theory states that when a price rises then consumption falls off as the price reaches market equlibrium. After Katrina/Rita it was determined that gas consumption fell off significantly at $3.00 per gallon but resumed normal consumption just below $2.80 per gallon, making the market price equilibrium of gas at that time $2.80 per gallon. But gas also has a price elasticity (how quickly it reacts to changes in price). Demand for gas changes at different rates based on whether the change in price is quick (short run) or over a longer period of time. As we have seen in the last year, consumption did not fall off when gas SLOWLY increased over $3.00 per gallon.
Higher gas or energy prices may not drive alternate methods. Unlike the 70's, when the gas shortages led to compact, more fuel efficient cars, now the higher gas prices are not being spent by oil companies to find better reserves and alternative supplies. Now corporations are driven by shareholders who want a quick return on their buck. That money was returned to shareholders through record oil company stock dividends rather than investing in new reserves, refineries, or alternate technologies.
New fuel alternative technologies will have to be driven by consumer desire. But there are millions of legacy cars, politicians on the oil company dole, the new love affair with ethanol, and the fact that our entire road system is funded by gas taxes (which is becoming an increasingly big "hot potato" as hybrid users pay less in gas tax at the pump). All of these make it difficult to effectively change the system without economic collapse/depression and/or significant government subsidy.
Gravatar # re: It's great to be echoed...
Posted by Alex on 1/20/2007 6:53 PM
Some good points there Scott, but I believe there's ample evidence to show that Shell and BP have been investing in alternative techonologies recently. Granted that's in addition to the dividends, and they could totally be doing the alternative energy thing to divert attention from the fact that they're destroying the planet, but my point is that it's possible that some oil companies actually do respond to lower consumption, and consumption is guaranteed to decrease at $4/gallon (which would be a fantastic price right now).
Anyway, I'm sure oil companies would absolutely love high gas prices if it didn't affect consumption. It's just a shame large gas taxes are such an unpopular idea.
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