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High gas prices are having some positive effects. Unfortunately, the underlying causes are highly problematic.
The economics of the current energy crisis are proving, once again, that no other social science is better at predicting human behavior. We’ve written about the increased use of mass transit in cities that aren’t mass-transit friendly. GreenCarCongress reports that 11 billion fewer miles were driven this past March.
2008 marks the first time since 1979 that there has been a drop in miles travelled in over the month of March. Over the first quarter of 2008, greenhouse gas emissions from the transportation sector have also dropped 9 million metric tons compared to past years, something that no amount of political posturing has yet to accomplish.
Marketwatch also makes a case for celebrating the consequences of high gas prices:
Americans should be celebrating rather than shuddering over the arrival of $4-a-gallon gasoline. We lived on cheap gas too long, failed to innovate and now face the consequences of competing for a finite resource amid fast-expanding global demand.
A further price rise as in Europe to $8 a gallon — or $200 and more to fill a large SUV’s tank — would be a catalyst for economic, political and social change of profound national and global impact. We could face an economic squeeze, but it would be the pain before the gain.
The article cites eight reasons why $8/gallon gas will do us a “world of good.” The problem is that only the consequences are good; all of the causes of high gas prices are bad, and they start with how our government has failed us miserably. No surprise there. We’ve had the illusion of cheap gas for decades. Meanwhile, our tax dollars have paid for the military to protect shipping routes and prop up dictators, just as they’ve subsidized the same oil companies that are now reporting record profits. Our elected officials have been so deep in the pockets of Big Oil and the automotive industry that they were blinded to the impending crisis. $200 oil may spark a technological revolution, but it will be driven by pure survival as opposed to strong leadership and vision. There’s a big difference. In the meantime, hostile foreign governments (OPEC) are amassing monumental sums of capital that they’ll use to acquire U.S. assets, such as our banks and ports.
Thankfully, The Economist puts this into perspective with a hint of optimism:
Some greens may welcome…three-figure oil as a way of limiting greenhouse emissions. Conservation will indeed increase. But everything high prices achieve could be done better by sensible carbon taxes. As well as curbing oil use, high prices have put tar sands in business which create far more carbon dioxide than conventional oil. Profits are going to ugly oil-fed regimes, not Western exchequers. And the wild unpredictability of prices will blunt the effect of dear oil on people’s behaviour.
The 1970s showed how demand and supply, inelastic in the short run, eventually give rise to conservation and new production. When all those new fields are on-stream, when the SUVs have been sold and the boilers replaced, the downcycle will take hold. By then the slow-motion oil shock could have catalysed momentous change. Right now motorists have no substitute for oil. But it is no coincidence that car companies are suddenly accelerating their plans to sell electric hybrids that are far cheaper to run than petrol or diesel cars at these prices. The first two oil shocks banished oil from power generation. How fitting if the third finished the job and began to free transport from oil’s century-long monopoly.
The question, then, is whether the electric power grid can handle a mass shift to electric automobiles. We’ll visit this issue in a coming post.
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