Blog author: jballor
by on Tuesday, May 9, 2006

You may have seen an op-ed in the NYT last week by Tom Friedman, who noted that when oil and gas prices go up, bad things happen in oil producing nations abroad. The tendency is for the oppressive regimes in oil producing nations to consolidate their power and be less responsive to the demands of their citizens when they have the added buffer of huge profits from the sale of oil.

And domestically many have made the claim that rising oil and gas prices are a bad thing. Many people’s pocketbooks have been hit hard, when they stop to fill up at the pump and over the course of the long winter. So many people are against high gas prices that politicians at almost every level have felt the need to respond and make some sort of gesture, token or substantive, to address the issue.

There’s no doubt that the poor, as in most cases, are disproportionately affected by high energy prices. People on fixed incomes often have trouble paying their utility bills when prices spike. Others who must commute to their jobs have trouble filling up the gas tank. Attention needs to be fixed on the people in these sorts of situations, and help should be there when they need it. It must be noted, too, that increased taxes have the same drawback as increased prices from market-pressures: they are regressive.

But for the vast majority of Americans, if addressed honestly, the rising cost of oil is more of an inconvenience than anything else. If people can afford to buy expensive new SUVs and large trucks, they can afford the pinch on their disposable income that higher gas prices mean.

Even so, the inconvenience does have the ability to change people’s behavior, and this is why I’m making the argument that high gas prices have the potential to be a good, albeit a costly one (so to speak). People might drive less, carpool more, walk to the corner store instead of driving, and so on.

But an even bigger point is this: as gas prices rise the cost relative to other forms of energy is bound to decrease. This is why so many environmental advocates have long been arguing in favor of some sort of hefty additional petroleum products tax, which would make other sources of energy more competitive.

But what so many fail to see is that the market can accomplish by itself what such artificial and authoritarian measures are intended to do. Clearly the price we pay at the gas pump includes a huge amount by way of taxes to the various levels of government. But when gas prices rise without an increase in the amount of government taxation, the market itself is making other cleaner and renewable sources of energy more competitive.

As the Cornwall Declaration observes, “A clean environment is a costly good.” This has never been more true than in the case of rising gas prices. The wealth created by market economies allows the creation of new, better, and more efficient technologies. And the market itself gives strong economic incentive to the pursuit of such endeavors, especially when oil prices are on the rise.

It’s high time that environmentalists stopped being so wishy-washy about the market. As Paul Jacobs points out, they like the market when the prices are high but hate it when they are low. On this inconsistency, Jacobs is right. But where he’s wrong, I think, is that arguing for the positive effects of the market in this case automatically means that you must otherwise be for increased taxation to accomplish the same goals.

Related Items:

“Bodies for Barrels,” The McLaughlin Group, May 5, 2006 (archived text of issue available here; search for ” Issue Two: Bodies for Barrels.”) Key quote from Tony Blankley: “I’m in favor of free markets. The people will go to smaller cars if they want them. And trying to force people to buy cars they don’t want is foolish. And anybody who wants to protect their family, particularly if you have children, you want them in a lot of steel around them. And that to me is the better call to protect your children – driving around in Suburbans and large vehicles.”

Tom Daschle and Vinod Khosla, “Miles Per Cob,” The New York Times, May 8, 2006. Another installment of the “governments create markets” fallacy.

Jordan J. Ballor, “Humanity’s creativity helps environment,” Detroit News, April 22, 2006.

Jordan J. Ballor, “Cashing in on Carbon Credits,” Acton Commentary, April 19, 2006.


  • http://www.thirddirection.com Mitchell

    I agree and have advocated higher gas prices for the reasons you mention. However, I also think there should tiered levels as well to discourage larger vehicles. For example, if you fill up with over x amount of gallons of gas, the price goes up. Sure, you could stop the gas pump, re-insert your CC and start filling up again, but the inconvenience to save a few pennies will be for a minority I believe.

    The only problem is, who determines the high price of gas? The point at which people change the preferences in vehicles is unclear and widely disputed by analysts. One person who argues $4/gallon would be fine, because they have the finances to still afford it. I think it still dispropotionally affects the poor, which is why I am starting to advocate a tiered pricing level.

  • http://www.majesticpublishers.com Dale Adams

    Is Our Government To Blame For High Gas Prices?

    Front and center in every form of media is the rising cost of oil and gas.
    It affects the lifestyles of every American and the costs of all goods and services we use. Many of us are shaking our fists and looking for somebody to blame. Before we start pointing the finger elsewhere maybe we should point it at ourselves.

    To our Governments credit, they realized the problem and have done something about it. They passed federal tax incentives that pay each and every American to make their home and business more energy efficient. Our government passes laws that benefit us financially when they want or need us to take action. Have you made your home more energy efficient and done your part to reduce our dependence on foreign countries?

    I’ll wager you that the percentage of Americans who have made their property more energy efficient and taken advantage of this tax break is very small. If most Americans took this simple inexpensive step (Almost paid in full by our government) we could dramatically reduce our oil consumption.

    There are inexpensive revolutionary new products now available to the public that can slash your prices of both gasoline and your electric bill. Almost all new homes being built now have these energy saving products. Doing their part, our Government continues to raise the energy efficiency requirements for appliances and other items via building codes.

    One of the best ways to slash your electric bill by 20% or more is to install radiant barrier in your attic. It reflects 95% of the heat before it enters your house. It can reduce the temperature in your home by almost 20 degrees. The average cost for a 1200 square foot home would be under $1,000.00. The government tax break allows a $500.00 tax credit. You could see a $400.00 monthly electric bill drop to around $300.00. It could pay for itself within a year and the government pays most of the bill. If every American took advantage of this, it would reduce our consumption and dependence of other nations by millions of barrels of oil. In turn, you would also save energy on fist wagging and the price of gas.

    In America almost 400 Senior Citizens die a year because of heat trauma. If every elder had radiant barrier installed in his or her home and it reduced the temperature by almost 20 degrees inside – I wonder how many lives it would save? I recommend you use the radiant barrier provided by Hy-Tech Thermal Solutions. The only incentive I receive by endorsing this product is the satisfaction of knowing that I provided you with a safe product that works.

    There is a new product called Enviro-Max Plus that is a fuel additive that actually works. When added to your gas tank it will increase your gas mileage by 30%. They claim that for every dollar you spend on their product you will save three dollars in gas. A friend used the additive on his way to Florida and he used two-½ tanks of fuel. On his way home he did not use it and it took 4 tanks of diesel to return home. It almost cut his diesel fuel consumption by half. A simple web search will inform you where to buy it and how to be a reseller to make extra money while helping our nation. I have noticed other copycat companies providing similar products and I would use caution.

    We now have a paint additive available that will reflect 95% of the heat away from your home. It is the same technology used on the space shuttle and jet engines on our airplanes. This ceramic technology has been around since the 1950’s but only recently available to the public thanks to the testing by NASA and Hy-Tech Thermal Solutions. It is the cheapest non-traditional insulation you can buy for your home with the average extra cost of only $120.00.

    By visiting the Department of Energy online you can learn many inexpensive ways to save energy in your home and cut your electric bill by 25%. They also provide testing results of Radiant Barrier from 1991. They should update these test results because radiant barrier products have improved.

    Other ways we can all do our part to protect our nation and environment is by recycling everything, install a solar backup energy supply, only buy from or invest in companies who are environmentally friendly and invest in innovative alternative energy, only install white reflective shingles on our roofs, buy energy star products and appliances, or by giving unwanted items away versus throwing them in the dump.

    We can also blame our media for our lack of knowledge of this new technology.
    Americans are suspicious of new untraditional products and it takes time for us to accept them. Several salesmen could tell us about them but we won’t adopt them until the mass media informs us. The media should be more problem-solution oriented. They will print information about the new tax laws, but don’t offer information about the new products it covers. When they talk about the high price of gas they should offer us ways to battle this problem with these new products. The media seems more interested in propaganda and the latest new widget versus their responsibility to inform and lead our nation in the right direction.

    We live in the greatest nation on earth. It is a free country that we had the luxury of being born in. For that reason we have the right to remain inactive, wave our fists at and blame our government or corporations all we want. I maintain that the status of our nation and the world requires action from each and every American to do our part to conserve our natural resources. If we don’t – it could very well lead to our demise. America can be defeated by its own citizens, as the Romans

  • Amanda Stephens

    What you say is good BUT I believe along with everyone else that the reason the prices of gasoline are rising is because they can. Everyone has to buy gas…that’s all there is to it. It’s very frustrating to the poor and middle class people b/c all they are doing is trying to make a living. If you notice ‘they’ always have a different excuse each time the gas prices rise. Why don’t they simply say b/c they can. It is truly sickening how ‘they’ don’t seem to care about people. I thought that’s what America is. With gas prices rising everything else rises…..bills and food. It’s all just ridiculous. What in the h*** is this world coming to? It’s really sad…..doesn’t it say ‘one nation under God’? I definitely know this is not what God intended.

  • http://stbarbara.blogspot.com John Powers

    Granted, God knows all, but I am not sure God intended low gas prices.

    God also knows that people can walk to work, not drive 20 miles for a gallon of milk, try the train, work from home, and about 1000 other alternatives to buying gasoline.

    Providing low priced gasoline has very little to do with “caring for people”. There is a market for gasoline, and the price varies. Currently it is cheaper to buy gasoline than Club Soda, so I am not so sure gas is actually “expensive”.

    JBP

  • ocs

    I don’t know about your car but my truck doesn’t run on club soda. I am not sure what club soda has to do with it. For that matter I pay about $32 for over 8,000 gallons of water a month; 8,000 gallons of gas right now would cost me over $24,000 so I guess it is expensive. Guess what, both comes from the ground, both are filtered etc., the water company has the expense of getting the water piped to my house. I guess the water company is getting screwed!

  • http://www.fromthemaas.com marc

    I suppose your water has to be pulled from the ground in a politically unstable region of the world, loaded onto a massive tanker and shipped across an ocean before going through a quite complex refining process in order to make it usable at your tap.