03 May 2008

Gas Prices Are Here to Stay

One dogged question for President Bush, presidential candidates, and congress seems to be, “What are you doing/going to do about the price of gas?” There are two assumptions here, one that politicians can do a great deal about gas prices, and two that the price of gas is, in fact, too high.

The biggest ideas from politicians come in the form of dubious band-aids. Recently, Senators McCain and Clinton want a gas tax “vacation” this summer. Of course, those tax dollars go toward building and maintaining infrastructure. And obviously all vacations must end at some point. What would the reaction be in early September to a reinstatement of the federal gas tax? Not a good scenario for either candidate. In reality, the gas tax “vacation” is just a ploy to buy votes.

That gas costs in the high $3 range and diesel is above $4 per gallon in the US is no shock to anyone who has traveled to other Western, non-oil producing states. During my time in Australia, before the recent gas spike, I was paying about $4.50 (US dollars) per gallon. Perhaps the recent spike has a lot to do with the dollar’s decline – it is roughly at parity with both the Australian and Canadian dollar (currency site). But then again, I’m no economist.

It seems to me, in my inexpert opinion, that there are a few ways that the US could, in the long term, reduce oil dependency. None of the following are original ideas.

Conservation is key. By this I mean intelligent conservation, not dogmatic, blind environmentalism. Individuals should look at what they need as opposed to what is a luxury. A proper question that I’ve answered in the last year is, “Do we need two cars, or will one do?” At some point, the answer to that question may change. But if the answer changes – if we do need to buy a second car – I have to ask myself if I need that Ford Mustang or if I ought to buy a car that uses much less gas. Sure, the Mustang is the more fun option…but that doesn’t make it the correct answer. These kinds of “need/want” questions aren’t just about cars; they’re about all of the “stuff” that surrounds us. All of it takes energy to manufacture, move, and consume; a consideration that deserves more attention.

Capacity also needs to be looked at. America’s oil production, refining capabilities, and reserve capacity should be enhanced. This means building new refineries and drilling in new places. Perhaps companies could build a corporate reserve at today’s price, assuming that oil prices will, as a general rule, continue to rise. I don’t imagine that these things will affect the price of gas or diesel much, but doing these things will buy us time down the road.

Lastly, private industry should enhance efforts to come up with “what’s next” after petroleum. Government should support those projects which strongly suggest positive outcomes – and, if possible, should be devoid of political tinkering. This is a long-term project. No one should expect a silver bullet within the next fifteen or twenty years. But with the help of individual conservation and increased domestic capability, Americans can hope for something beyond ever-rising gas prices.

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