Thursday, February 17, 2005

Gas is too cheap by half

As I was driving home from work this evening, surveying the endless sea of tail lights in front of me, it became very clear to me. Gasoline is not nearly expensive enough. In the back of our minds, we all know that oil is a limited resource and we oughtn't guzzle so much. And we all know that all this gas combustion is not good for our air quality. And we all know that our national dependence on oil makes our relationship with our Middle East suppliers not unlike a crack addict's relationship with his dealer. A few of us are even starting to realize that the emergence of China and India as pre-eminent oil consumers is going to challenge our economy in profound ways. So why don't we do much about it? Because we're addicted to our cars, and for now, gas is reasonably (or perhaps unreasonably) cheap. This is one of those situations where the free market system fails to operate to our best interest. I forget the proper econ jargon, but it's something like "internal costs" that aren't being "externalized". The market price of gas does not reflect the cost of damaged air quality, the cost of using up a non-renewable resource, or the cost of being dependent on foreign regimes. Because these hidden costs are not priced in to our cheap gas, the consumer demand for cleaner air, renewable resources, and less foreign dependence is anemic. (One example: the average fuel economy of the new car fleet has fallen every year since 1986.) What we need is a serious tax on gasoline, to drive pump prices up to European levels and beyond, so that people might actually change their behavior. If we paid $5/gallon, I think we'd suddenly see more people car-pooling or taking public transport (and we'd certainly see fewer ridiculously outsized cars on the road). At least some of this revenue could be put into a vital energy program, with appropriate national attention and support, the likes of which we haven't seen since the Apollo space program. If we put that level of priority and resources into solving our energy problems, we would see some real progress in energy technology (not to mention the opportunity to establish American pre-eminence in a new technology area).

No comments: