Gas Prices

If you’re worried about the almost $4.00 a gallon gasoline, don’t be. It’s good for you or, maybe, us. That’s the contention of Daniel Esty, Commissioner of Conneticut Department of Environmental Resources and Michael Porter, professor at Harvard Business School as outlined in an op-ed piece for The New York Times. Their arguments are interesting.

  For instance, higher gasoline prices reduce our country’s international trade deficit because we won’t have to import as much oil. Higher prices will also move us more quickly and more efficiently to clean energy. Higher prices for gasoline are a better incentive than subsidies for alternative energy. In other words, price-wise, alternative energy will become more competitive with gasoline and require fewer subsidies. Adding on a carbon use tax to discourage use of coal and oil not only works to reduce our annual budget deficits, but moves us toward using more natural gas and other, cleaner fuels.

  Under that scenario things come out pretty good even if our personal budgets are stressed. I can even add that if we drive fewer miles we’ll kill and injure fewer people. After all we kill nearly 40,000 a year and injure a couple of million. That’s a costly burden on the health care system.

 Also, I’ve been considering putting a windmill on top of my car to run my generator which could power batteries which would run the motor and all of which could lead to a revolution in mobile power.

  Moving on, however, to a couple of counter arguments to Esty’s and Porter’s arguments. First, we’ve been in a deep recession for three years and the economy is just recovering. Fuel use (and carbon emissions) has declined dramatically because of it. What happens when the economy recovers fully and expands rapidly?  Where will we get the necessary fuel? Can these alternative fuels fill the gap? What happens if we get cut off from the Middle East or the fuel needs of China and India suck up most of the supply?

          Natural gas is part of the answer. Potentially, we have plenty of it, but no government entity is making a move toward outfitting its fleets with natural gas conversion units. In addition, there is currently a major concern about the environmental effects of natural gas drilling in the Marcellus Shale fields of West Virginia, Pennsylvania and New York. This will be resolved, but there may be delays.

          Also, oil has more uses than vehicle fuels. Oils are used in an estimated 6,000 products including solvents, upholstery, bicycle tires, skis, CD players, footballs, crayons and so forth and so on.  Can rising prices on all these products be helpful to the economy? Are higher prices on basic goods good for poorer families, or do we solve that problem by addition of more public subsidies. Europe has gotten used to gasoline prices ranging from $7 to $10 a gallon, but I haven’t seen a big switch to alternative fuels nor a reduction in their budget deficits.

          Are we really helped by gleefully watching gasoline prices rise? Of course, the ultimate question is what can we do about it? Maybe increasing domestic oil supplies would be helpful. That might take some of the speculation out of the market. Or, we could ask Saudi Arabia to increase its production. Unfortunately, they’ve already decided to cut back production.

          That, of course, leads us to who is to blame. Last time it was George W. Bush and his family oil ties to the Saudi’s. Now it’s Barrack Obama and his anti-drilling stance and his administration’s poor relationship with the Saudis. Could it really be that it is a combination of supply and demand and the consequent speculation in commodities?


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