April 25, 2006
WRTA
 Brown
Shoes Diary
Nine Reasons to Smile at the Gas Pump
A couple of years ago when gasoline prices
hit an all-time nominal high of $2 a gallon, a friend asked me if this was a
temporary thing or should he get used to paying $2 a gallon. Well, I assured
him that $2 a gallon was temporary and it turns out I was right, but not
exactly as I had thought. Spending $50 to fill up my tank the other day did
seem a tad much, but it got me to thinking about the upside of gasoline
prices.
For starters, as gasoline prices continue to rise there will be less traffic
on the roads and that's definitely a good thing. Between the increased number
of cars and their growing size, (not to mention that everyone over 16 and
under 102 years of age is driving) it seems space has been a tough thing to
find on the highway.
A second advantage to higher gas prices is that I will be doing less driving,
but more walking and bicycling. That will be a real boon to my health.
Healthier heart, lowered risk of diabetes, and more physical and mental
energy. And I'm surely not the only Altoonan who could use a little bit more
exercise. Okay, a lot more exercise.
Advantage number three concerns the environment. Pollution and the other
negative externalities caused by burning fossil fuels will likely decline with
higher gasoline prices. The Sierra Club has been advocating $3 a gallon
gasoline for years, so now their wish has come true. Maybe they'll shut up
for while--well, no chance that's going to happen, but who has time and money
to listen to them with gas prices at these levels?
Advantage number four of high gasoline prices is high profits for the oil
companies. I don't know about you, but energy stocks and Wal-Mart are about
the only top performing investments in my retirement portfolio right now. If
they tank, a lot of us are going to be in big trouble when we reach our
"golden" years.
Advantage number five is increased demand for mass transportation, including
rail transportation. Seems like a no-brainer for a railroad town such as
Altoona to prefer expensive gasoline that increases the incentives for the
public to use the railroads. Maybe if gasoline got high enough, like $5 a
gallon, Amtrak could actually break even.
Advantage number six is a bit personal--high gasoline prices generate a lot of
hot air on talk-radio as well as on the TV news shows. That gives an
economics professor (and a once a week radio co-host) such as I plenty of
examples of economic fallacies and other illogical thinking. Bill O'Reilly
comes to mind. He seems absolutely convinced that gasoline prices are NOT set
by demand and supply forces, but rather are controlled by some anti-American
American cabal. When Tony Snow pointed out to him that a gallon of milk is
just as expensive as a gallon of gasoline right now, O'Reilly's comment was
that milk is not nearly as necessary and vital for our nation's economy and
security. That, of course, is an argument that gasoline prices ought to be
higher than milk, not lower, but neither O'Reilly nor Snow cared to pursue
that line of thinking.
All things considered, I guess I would prefer low gasoline prices to high
gasoline prices. So how can we get prices down? Only two possible ways--a
slackening in demand or an increase in supply. Over time, we'll find
substitutes (such as walking, bicycling, more efficient trips, telecommuting,
etc.) for energy expenditures which will reduce the demand. But we also need
to make sure the supply will expand too. Yes, it's time to drill for oil in
ANWR. Sorry, Sierra Club, you can't have both high prices and virgin snow.
And until supply can catch up with demand, we need to conserve our scarce
energy resources.
That's three more things high gasoline prices do--shift demand to substitutes,
provide incentives for conservation, and motivate producers to seek out new
supplies. I kind of like the price-mechanism of the capitalist system. Even
when a price rises, it does all the right things.
The opinions and ideas expressed in this essay are those of John D
McGinnis and should not be considered representative of WRTA.com, any
institution with which McGinnis is associated, or anyone else. He can be
contacted at zoiprof@atlanticbb.net.
Contact John D McGinnis
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