Why We Need Higher Gas Prices 23 comments
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This cartoon by Richard Thompson, from Dave Barry’s excellent Year in Review, reminds me that the “gasoline price roulette” we’ve experienced this year has not been a good thing for Americans–even as we now enjoy sub $2/gallon prices (and as my family’s just made the road trip from Virginia to Ohio).
Why not? Because just as we were starting to adapt to the $4/gallon prices we saw in the peak of summer–by driving less and more efficiently, shunning gas-guzzling SUVs, and getting on waiting lists for hybrids–the larger forces of a deeper, world-economy-wide recession started to bring gasoline prices quickly back down. And what happened? Check out the official data from the Energy Department’s Energy Information Administration. Here’s the plot of retail gasoline prices over the past couple years (click to enlarge):
Note the peak is July ‘08, and the far right trough is where we are now…
And here are the plots of U.S. gasoline production and gasoline demand, over the past year (the yellow and red segments; the blue line compares to same months last year) (click to enlarge):
The middle of the two graphs above show U.S. production (supply) and demand in July. That yellow line shows that both did not rise during the peak summer travel period but instead remained flat. (Contrast with the July-August period in 2007, the blue dotted line.) And in September-October of this year, both dropped off dramatically, further widening the decline from the prior year. But since this fall when gasoline prices started rapidly falling, gasoline demand has rebounded just as dramatically, wiping out nearly all of the early-fall decline, and U.S. gasoline production now fully matches its 2007 levels.
Which is why I think–and I’ve said this before–our country needs higher gasoline prices, assisted by government policies that would more appropriately “price” the external costs associated with the use of fossil fuels, such as through a carbon tax or cap-and-trade program. It’s not just a higher price we need, but a higher and certain price. And it’s not just us stupid, near-sighted American consumers who need to be forced into the better behavior of consuming gasoline more efficiently (conserving), but also the not-necessarily-stupid-but-profit-seeking, near-sighted Detroit automakers who need to be “incentivized” into the better behavior of producing more fuel-efficient technologies and vehicles.
I’m not talking about enacting and implementing a carbon tax now, in the midst of this awful recession. But I strongly agree with Resources for the Future’s Richard Morgenstern, who recently argued (in “The Hill” newspaper) that the incoming Obama Administration must make an early and clear commitment to establishing a carbon-pricing policy that would take effect as soon as the economy begins to recover:
Obama clearly supports reductions in oil consumption and an attack on global warming. But a chorus of voices wants him to set aside any significant initiatives in these areas while he struggles to pull the country out of recession. Green elements of the stimulus package, they believe, will provide sufficient push for low- and no-carbon technologies, thus obviating the need for early decisions on a cap-and-trade or other carbon-pricing regime. But announcing at the outset an explicit plan for carbon pricing is essential — for two reasons.
First, setting a carbon-pricing target would strongly signal to both business and consumers that new technologies must be developed and adopted without delay. Without that price incentive, the advent of greener forms of energy will be postponed yet again.
Second, setting a price on carbon emissions will assure a revenue stream to support future climate-related programs — and, quite possibly, other initiatives as well. The stimulus package cannot go on forever, and carbon revenues can give the federal government the wherewithal to fund future initiatives.
Opponents of an early announcement on carbon pricing say it may worsen the recession. The reality is that any such scheme cannot be implemented immediately, given the need to develop legislation and subsequent regulations…the president could propose an explicit mechanism to postpone implementation in the event certain economic conditions are not met…
[I]t is the best way to reduce uncertainty about U.S. climate policy. Without such directives, investors will continue to act as if carbon emissions are free…
A cap-and-trade system will put a price on those emissions, creating an incentive to develop and adopt more carbon-efficient technologies — much like the recent run-up in gasoline prices shifted consumer purchases in favor of fuel-efficient vehicles. As the economy rebounds, the expectation that an already enacted carbon-pricing scheme will soon kick in will trigger green investments. Early action could be further encouraged by distributing allowances — bankable for future use in a carbon-pricing program — to firms that reduce emissions prior to program implementation.
The way I see it is that one consumer’s gasoline bill is another automaker’s return on his green investment. Detroit isn’t going to “transform” just because the government goes “poof”–and isn’t likely to reform efficiently just because the government says “jump.”
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This article has 23 comments:
Of the money we have seen thrown around thus far let me ask you this, that 168 billion that our country borrowed to give away to us in the form of an "economic stimulus package" ...did it do a darn thing to create jobs or stimulate our economy? NO, nothing. And we borrowed the money from China.
This past year the high cost of gas nearly destroyed our economy and society. More people lost jobs and homes as a direct result of that than any other factor in our history.
Fannie and Freddie continue to get all the blame. Of all the homes I have seen lost in my area SW FL and believe me I have seen many, none were due to an adjustable mortgage. They were due to lack of work.
Families went broke at the pump alone. Then added to that most saw record rate hikes at their utility companies. The high cost of fuel resulted in higher production and shipping costs that were passed on to the consumer, in most cases higher prices for smaller packaging.
Consumers tightened their belts, cut back, went out to eat less or stopped totally. Drove around on tires that needed replacing longer, some even quit buying medicines they really need.Unfortunately cutting back and spending less results in even more layoffs. A real economical catch-22.
And, as we are doing the happy dance around the lower prices at the pumps OPEC is planning to cut production to raise prices. They are even getting Russia in on the cutbacks. Oil is finite. We have used up the easy to get to reserves already. It will run out one day.
We have so much available to us. Solar and Wind are free sources of energy. Of course to get the harnessing process set up is somewhat costly it is still free energy.
It would cost the equivalent of 60 cents per gallon to charge and drive an electric car. The electricity to charge the car could be generated by solar or wind at least in part and in most cases totally.
If all gasoline cars, trucks, and suv’s instead had plug-in electric drive trains, the amount of electricity needed to replace gasoline is about equal to the estimated wind energy potential of the state of North Dakota. What a powerful resources we have neglected.
Jeff Wilson has a profound new book out called The Manhattan Project of 2009 Energy Independence Now. www.themanhattanprojec... Powerful, powerful book! Also, if you think electric cars are way out there in some futuristic lala land please check out the web site for a company Better Place. www.betterplace.com/ they are setting up infrastructures in San Francisco, San Jose and Oakland as well as the state of Hawaii to accommodate electric car use.
I think we need to rethink all these bailouts and stimulus packages. We need to use some of these billions to bail America out of it's dependence on foreign oil. Create clean cheap energy, create millions of badly needed new green collar jobs and get out from under the grip foreign oil has on us. What a win -win situation that would be for America at large
Of the money we have seen thrown around thus far let me ask you this, that 168 billion that our country borrowed to give away to us in the form of an "economic stimulus package" ...did it do a darn thing to create jobs or stimulate our economy? NO, nothing. And we borrowed the money from China.
This past year the high cost of gas nearly destroyed our economy and society. More people lost jobs and homes as a direct result of that than any other factor in our history.
Fannie and Freddie continue to get all the blame. Of all the homes I have seen lost in my area SW FL and believe me I have seen many, none were due to an adjustable mortgage. They were due to lack of work.
Families went broke at the pump alone. Then added to that most saw record rate hikes at their utility companies. The high cost of fuel resulted in higher production and shipping costs that were passed on to the consumer, in most cases higher prices for smaller packaging.
Consumers tightened their belts, cut back, went out to eat less or stopped totally. Drove around on tires that needed replacing longer, some even quit buying medicines they really need.Unfortunately cutting back and spending less results in even more layoffs. A real economical catch-22.
And, as we are doing the happy dance around the lower prices at the pumps OPEC is planning to cut production to raise prices. They are even getting Russia in on the cutbacks. Oil is finite. We have used up the easy to get to reserves already. It will run out one day.
We have so much available to us. Solar and Wind are free sources of energy. Of course to get the harnessing process set up is somewhat costly it is still free energy.
It would cost the equivalent of 60 cents per gallon to charge and drive an electric car. The electricity to charge the car could be generated by solar or wind at least in part and in most cases totally.
If all gasoline cars, trucks, and suv’s instead had plug-in electric drive trains, the amount of electricity needed to replace gasoline is about equal to the estimated wind energy potential of the state of North Dakota. What a powerful resources we have neglected.
Jeff Wilson has a profound new book out called The Manhattan Project of 2009 Energy Independence Now. www.themanhattanprojec... Powerful, powerful book! Also, if you think electric cars are way out there in some futuristic lala land please check out the web site for a company Better Place. www.betterplace.com/ they are setting up infrastructures in San Francisco, San Jose and Oakland as well as the state of Hawaii to accommodate electric car use.
I think we need to rethink all these bailouts and stimulus packages. We need to use some of these billions to bail America out of it's dependence on foreign oil. Create clean cheap energy, create millions of badly needed new green collar jobs and get out from under the grip foreign oil has on us. What a win -win situation that would be for America at large
I don't believe for a minute that I can get persons to accept my arguments against emissions trading (or cap-and-trade) unless, possibly, they were in a seminar or conference where I was doing my song and dance, but in that setting they might get the message.
And, before I forget, solar and wind are NOT free, and they are NOT cheap. MORE solar thermal and wind are definitely needed, but forget about making them the background of US 'energy independence'.- if there is such a thing.
So, consumers will buy more fuel efficient cars. They won't do it so dramatically as they would if oil was $147/bbl. And, you can see this at the new car dealerships. Fuel efficent cars still sell better then the big SUVs. Note that big SUVs have $5000 rebates on them to move them. You can bet your last dollar that the car manufacturers will cut back on those vehicles because they obviously are not making money on them.
looks like you should seek govt. employment. with your socialist engineering preferences you will fit right in. the market seems an odd place for you. use the law to distort the market and force everyone to comply to the green wishes.
socialism has failed everytime except for primitive tribal communities and the temporary kibutz situation that israel used to help immigrants get ready to care for themselves.
the latest example of failure is right here in the good ol' usa. i know the propaganda says it was the free market. if you believe that then obama is a good honest man and reform is on the way. just another corrupt piece of refuse from illinois. anybody catch axelrod lying on meet the press yesterday? he is a polished lier but the senate seat scandal seems to evoke panic. cover-up. will the marxist slither out of this one? probably. he has a large corp of zealots and fanatics to fall back on.
we hate those haters and we won't tolerate their intolerance.
I pity the folks who believed gas was going to $6 and $8 a gallon and went out and traded in the existing vehicle (at a low trade in price) for an overpriced "efficient" vehicle. They wasted money AND energy (how much energy went into producing the new vehicle?)
All these wild variations are doing is driving people to make bad decisions. Our economy would be much better off if we set a reasonable price for gas, such as $2.50 a gallon (with perhaps a 8 or 10% per year increase) and added tax when it was lower and used that same tax money to rebate prices when it went higher. THEN people and corporations could make intelligent long term decisions.
Of course such a sensible plan will never be done because too many of our politicians and their friends make money from the gyrations.
Bobcat comments:
prices are down and people are not using more gas just because prices dropped. people are not just avoiding the efficient small cars but the large as well. Americans can't afford anything right now and to tell us like we are some moronic robot to follow the leader and force prices up so we can buy more efficient vehicles is down right stupid. Unemployment is the highest in years. consumption of oil is down due to the lack of people working not the facad of people actualy caring and trying to consume less. Consumption will be down for several more years along with the unemployment!
Ferdinand Banks comments:
The cap-and-trade thing that the new president and his 'energy team' have unfortunately bought was sold by pseudo-experts and other know-nothings as the one that has succeeded in Europe. But it has NOT succeeded in Europe. Cap-and-trade is little better than a scam. Check out the work of Professor David Victor of Stanford University on this subject.
my comments or two cents:
keep up the work on new technologies and alternatives- "cheap" oil is on
the meter, so we can count on scarce resources and geopolitical headaches down the road- I'll include all survival resources in the "boat", fresh water, healthy soil, sustainable oceans, pure air. The world is degrading as we speak.
Humans have determined to over-populate the planet, let's see how the strategy
plays out over the next 5-30 years on our precious natural resources- unhealthy
and aging humans will keep the health care industries in business.
One can argue that tax exemptions could be applied for fuel used in the transportation of goods, but what of the local repair man, delivery service, building contractor, and the like? As soon as selective exemptions are applied, some government bureaucrat is now picking winners and losers, and the probability of corrupt practices grows. Let the markets dictate the price, and let the economy heal itself.
Our Country needs to be less dependent on foreign oil. So we need to convert vehicles to not use gasoline. Electric vehicles are not ready to fully substitute for gasoline powered vehicles given their current range limitations. Hence, we need an interim solution.
One interim solution is to manufacture new vehicles that run on natural gas. Part of the solution is to build the infrastructure to distribute natural gas to vehicles. A second part of the solution is to mandate that all new vehicles sold in the US must run on natural gas. Not duel fuels, natural gas. A third part of the solution is to provide tax credits to offset the conversion of existing gasoline vehicles to run on natural gas. A fourth part of the solution is to drastically increase R&D on electric vehicles and fuel cell vehicles. If we can put a man on the moon in under ten years then we should certainly be able to build highly effective electric / fuel cell vehicles within that same time period. Perhaps natural gas could be used in a fuel cell type vehicle.
The needed transitions need to be government mandated, not driven by artificially driving gas prices higher. If you don't mandate the transition, then as less gasoline is used, its price will drop, and that will attract more people back to gasoline powered vehicles. Another reason such a transition needs to be government mandated is because it will cut across so many aspects of our countries economy.
Is such a plan intrinsically Anti-American? Sometimes Americans face critically important issues that are so large that the solution will not surface in time before real damage is done to the country. If a country is spending more money buying things then selling things, then more and more debt accumulates. We are already the number one debtor country in the world. This can't continue.
The government mandated that environmental protection equipment needed to be placed on all vehicles sold in this country. This was not an un-American decision. It was a decision made in the interests of our citizens. It was also a decision that would NOT have been made by the automotive manufacturers because such equipment decreases vehicle performance. The governments decision to remove leaded gasoline for sale was another decision made for the benefit of our citizens health. Sometimes, the peoples government needs to make rules that benefits its citizens. Rules that would not be made by businesses who's primary goal is quite naturally focused on increasing profitability.
ts long past time to stop transferring America's wealth to foreign countries to buy their oil. A recent article pointed out that the recent drop in oil prices is saving Americans one billion dollars per day. One billion dollars per day staying in this country. What a concept!
Adoption of a program along these lines provides quite a few benefits. Number one, our countries money says here. Number two, there are green advantages. Number three, it would require a substantial investment in new infrastructure and increased R&D spending, which translates to increased jobs. Number four, people are going to want new vehicles specifically designed to run on these alternative energy sources which increases vehicle sales.
NO, it can't be done overnight, YES, it will be disruptive, YES, natural gas is not the end all solution. However, natural gas does provide a good transition solution, and it does provide a first step to something that should be a natural priority - removal of this countries dependence on foreign oil.
Then oil prices and gas prices went crazy. The demand for gas was inelastic, given the great distances we drive from home to work or any common event. (Walking is done on a treadmill watching TV. Some drive to the gym to walk. Suburban development since the 1950's has made walking impossible. That's where real cities do have an advantage.)
The money that could have been raised by a nickel or dime fuel tax ended up in the Middle East as an up to $2.50 supply shortage price premium was paid. Had there been a tax that leveled cost over time, more of that money would have stayed here. It represented an opportunity lost. Our potential road improvements ended up in the Arabian sands.
Commodity markets are small. They do boom and bust, particularly when they attract spec money. A flexible rate fuel surcharge that would keep the per gallon rate about $2.99 - (still cheaper than bottled water or bistro coffee) would build resilience by requiring a focus on fuel efficiency.
Distribution and marketing cost for fuel have ranged from 8% to 12% in the past according to data at the PTS Blog: peltiertech.com/WordPr.../
The current accounts adjustment in the infrastructure revenue share would adjust to total costs. A mark-up range would allow competition at the pump.
For low income or other hardship situations a tax credit or partial rebate could be offered. A high percentage of transactions are by credit card, so it would be an option to track gallons of use by date for comutation of a credit.
Cheap commodity prices lead to over-indulgence. High commodity prices to cold turkey withdrawal. We've recently been turkeys. For the good of the flock, I think we should organize to limit recurrence of that.
As an example, any sort of "carbon tax" isn't going to do the American people any good, it's just going to siphon money from the pockets of tax payers, and give it to the government so the government can waste it.
Looking at a concrete example, policy aimed at taxing coal utilities into bankruptcy may make some Hollywood liberals and wine-sipping Ivy League elitist types feel virtuous, but every other country on the globe will still use coal in the dirtiest and most cost-efficient and convenient way imagineable for decades, while hostile foreign governments and hostile foreign corporations gain control over American coal reserves so they can use our coal to their greatest advantage.
On the other hand, tax exemptions for coal utilities achieving low carbon goals, and subsidies for developing and installing clean coal technology that will initially be somewhat expensive, will stimulate American energy evolution in a positive direction while keeping the resource and the leverage in our hands, simultaneously keeping American workers on the job and out of soup kitchens.
While we're doing that, fly ash from coal utility plants can be used as sub-paving material for roads and highways, an example of using high volume construction materials that don't rely on petroleum products, preventing the accumulation of sludge lakes while rebuilding our highway infrastructure. We can pay the coal utilities for their fly ash and use it for paving, and drive down energy costs to consumers in the process, or fine the coal utilities for the inevitable consequences of accumulating fly ash because we haven't adopted the process of using it for paving.
www.youtube.com/watch?.... copy and paste to your web browser , or click on my website
Global warming and our "carbon footprints" are a scam to keep environmentalists from having to find real jobs. Let's drill and produce the oil and gas that we've got in our own country and build more refineries to become independent of foreign oil- and give more Americans jobs.
We are facing a real energy crisis. Too many of these "comments" strongly suggest otherwise. If and when the too likely scenario of a significant disruption of the primary supply of crude in the middle east occurs, last summer's prices will look like the "good old days".
We don't need to wait on OPEC to get a workable production reduction agreement to double the present price to $70-$80 per barrell. They will get it sooner than later, and that success might well entice them to keep driving the price higher. If the world economy was not in the state of collapse that it now is OPEC would already have turned the screws on us. Their intent is to wring every last penney out of us, pure and simple. We beat them (along with the rest of the industrialized world0 to the punch by all falling into an economic black hole and ultimately reducing demand. Some consolation.
Geopolitical wars and environmental destruction coupled with economic ruin are the apocalyptic brothers of "cheap oil"
America needs to do better, and sooner than later.
These vehicles are still overpriced, but as time passes and more are on the road, I think prices will go down, then I'll buy one.
.First of all, I have MCS (multiple Chemical Sensitivity). (No, it's not psychological-look at Martin Pall's work of missing or low detox enzymes and a defective blood-brain barrier) and other reports of a damaged Central Nervous System. I don't hear 1 word from the environmentalists in the defense of those with MCS, nor do they breath one word of defense for those ill from: Agent Orange, Gulf War Syndrome, Depleted Uranium from our perpetual wars and those ill from 9/11...NOT ONE WORD!---Come to think of it, they've never metioned the Bhopal, India incident either (to my knowledge).
Now, just look up at the sky sometimes. Almost everyday, people can see those nasty CHEM TRAILS (usually in the form of grids or intersecting lines) and then the skies turn slurry white.
Also never mentioned is HAARP (High Frequency Active Auroral Research) which is used in Weather Manipulation. HAARP is Tesla-based technology.
These things aren't mentioned either: GM terminator seeds (Indian farmers committed suicide over this) , fluoridated water, all the garbage on the U.S. border from illegal aliens and last but not least, China's Carbon Footprint.
There is a lot going on that these "so-called environtalists" just don't seem to care about. Whenever I wrote any "environtalist" web sites about MCS, they almost never responded....that's when I became suspicous as to what their true nature is. They did care, however, about the chemicals bioaccumulating in the fat of Orcas, seals and polar bears though, but when it comes to people being poisoned, these "environmentalists and Earth Day/Hour people don't care!
I also was suspicious when California got hit with over 2500 fires burning in 1 day. True, we get some pretty serious fires, but if we get the Santa Ana winds, fires whip up in the S. CA and if we get lightning strkes, they usually either hit the Sierra and/or S. CA. Lightning rarely hits the coastal ranges, particularly up near Eureka and further up north toward Oregon. .....Yup, for all you environmentalists that don't care about Chem Trails and HAARP, the "air quality was just lovely."
Also what seemed very "convenient," was that all of a sudden in November, the weather got hot and bingo, the Montecito fires broke out (just in the nick of time for the "HOLLYWOOD Global Warming" meeting.