May 9, 2006

Rising gas prices may be a blessing

The (really, really, really) smart guys over at the Becker-Posner blog have been discussing the rising gas prices in terms of economic and political causes and implications. As usual, all the posts are worth reading, but I was particularly enthralled by Judge Posner's opening remarks after Gary Becker started the debate.My completely uneducated take on the matter (based only on Allen Sanderson's Econ 198 course) is that rising gas prices are not really that bad of a thing. As Judge Posner points out, the current prices are still below prices this country has paid in the past, and lower than prices currently paid in western Europe. Europe's high prices are primarily due to extremely high taxes that do the job of significantly lowering demand, and forcing the market to deal with higher costs. The result is that Europeans drive less, and drive vehicles that consume much less fuel. Look only at the average size of cars in a European city compared to those in any urban center in the U.S.If this country wants to ease its dependence on foreign oil, and oil in general for that matter, it must invest in energy-saving technology, but it must be done in a way such that economic incentives exist for those who are going to invest. Increasing gas prices, whether "naturally" or with the kind of taxes seen in Europe, will certainly help this cause.Our dependence on oil is a threat to our environment, a threat to our national security, and ultimately, a threat to this country's future when the oil runs out, whether that is in 50 years or 500. That said, weaning off our addiction must be done with economic incentives, not brute force.