The funny thing about this picture is that a couple years ago, these prices would have been high! Although I usually avoid the realm of political commentary on this blog, I couldn’t help but write about the current “gasoline crisis.”
Maybe this comment will come back to haunt me years down the road when I’m running for elected office, or maybe it will simply reveal my invisible hand tendencies, but I simply don’t have too much pity for today’s motorist. So gas prices are pushing, and in many places have exceeded, three dollars per gallon. Does this actually come as a surprise?
I read that there are more V8 automobiles on the road than four-cylinders. Even my own two dear sisters drive SUV’s when a simple family sedan would probably suit their needs just as well. The collective mindset of America seems to be that oil is an unlimited resource, and that makes whining about gas prices and oil-industry profits particularly annoying.
First to address the oil-industry’s profits. I don’t claim to understand the economics of this (e.g., that companies like Exxon have to make huge multi-billion dollar investments that affect the course of the company over 10 or 20 years, hence quarterly performance indices are less relevant). But I do recognize that America and even the world is a free market. Developing economies, notably in South and East Asia, compete for the same oil that suburban Americans need to commute 30 miles daily to work. Because the supply is fairly rigid, an increase in demand will riase the price of the oil. And as far as “price gouging,” that would require illegal cooperation between oil corporations. Governmental agencies are not always swift and nimble (one might think about FEMA here), but c’mon, the SEC surely has to have a few folks focused on the oil industry. I think simple economics are the greater force at play here. Katrina knocks out refineries and the supply decreases, so the price increases. Those oil companies able to continue to provide make a profit. That’s the way it works.
And now–the whining. I don’t see rising gas prices entirely bad. A physician whom I heard last fall lecture on the problems with Medicare made the point that when there is much at stake, the tendency is to wait until a state of crisis until drastic changes are made. Clearly when gasoline was $1.50 a gallon, investors weren’t lining up at the doors of ethanol research labs. Perhaps it takes a bit of a pinch on the pocketbook to grab the attention of the sluggish and often-stubborn collective American mindset. “Perhaps we should look into alternative fuel sources. Perhaps we should have done this 10 or 15 years ago, but oh yes, we just weren’t that worried about fuel prices back then. And oh yes, perhaps drilling in the Arctic National Wildlife Reserve could possibly damage an irreplacable resource all for a few drops of oil. And now that we think about it, perhaps we should defer that $100 government check and apply those resources toward alternative fuel research and development. In the meantime, you can find us carpooling to work, and even exploring lifestyle adjustments like riding public transportation.”