Saturday, October 25, 2008

The high price of gas

In recent months with the election season going full tilt and as gasoline prices soar we often hear people, politicians and pundits complaining about the high price of gas and how this is hurting the working class folk (i.e. the middle class and poor).

This is wrong!  The price of gas is unimportant.  What is important is the cost of transportation.  It does not matter if gas goes up to $8 a gallon next year if it costs you 50% less to commute where you need to go.   "Duh, that is obvious" you say and continue "and how are my commute costs going to go down 50% if the price of gas goes up?".

The point of my statement is to focus your attention where it really belongs.  If you focus on the cost of gas then you may ignore many viable (and perhaps better) solutions to your problem.

Instead of following Newt Gingrich's idiotic "drill here, drill now" suggestion, which will do next to nothing to reduce your transportation expenses (the proof of this is left as an exercise to the student.  HINTS: how much oil does the US consume, how much is available via off shore drilling, when will that off shore oil come online, what impact will that volume of oil have on the price of oil), the government should tax gasoline even more than it current does.  Add another $1 to the price of each gallon and use that money to subsidize the purchase of fuel efficient cars.  These efficient cars can be hybrids or conventional gas engines.  They can be electric or hydrogen.  

I'll let the conservatives and liberals battle it out over whether my "efficient upgrade" subsidy should be progressive (help the poor more) or not.  The point is to get people into fuel efficient vehicles quickly and cheaply and to penalize folks who drive gas guzzling SUVs needlessly.  In addition to lowering folks transportations costs by increasing their fuel efficiency, this sort of plan would also drastically reduce the USA's fuel consumption (i.e. demand for gasoline) and thereby reduce gas prices.

Of course moving away from the suburban model of living and driving everywhere is an even better long term solution, turning over the automobile stock to get folks into more efficient vehicles is easier to do in the short term and would have a huge impact.

A PUZZLE: the choice to encourage suburban sprawl was a conscious decision made by the federal government decades ago.  Why did the US government decide that it was important to have sprawl?  They had a good reason (if you accept their premises).

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