Why Gas is Too Cheap
Many U.S. consumers are horrified by the oil spill, but continue to be horrified by gas prices as well. Photo via abbyladybug.

Many U.S. consumers are horrified by the oil spill, but continue to be horrified by gas prices as well. Photo via abbyladybug.

“As the sludge choking the Gulf of Mexico shows, nothing is easy when it comes to oil. Not even the price. In fact, especially not the price.” – Ezra Klein, in the Washington Post

Disturbing footage of oil spewing into the Gulf and washing up on the wetlands is just the latest and most egregious example of why gas is too cheap.

The demand for gas to support our nation’s car culture is directly correlated with the supply-side crisis unfolding in the Gulf.  But as fishermen lose their livelihoods, tourism and real estate slump in the region, and worst-case scenarios for ecosystem degradation keep getting worse, gas prices won’t pay for recovery.

This is just one of the reasons why the price you pay at the pump is far too low, as Klein highlighted in the Post last week.

The list of the “hidden costs” of gasoline goes on (and on).

Pollution is at the top of the list. As Klein points out, whether you drive or not, you breathe polluted air. Similarly, whether you drive or not, gas fumes are contributing to climate change, which Klein notes is hard to price, “because it involves such esoteric calculations as how much your grandchild’s climate is worth.”

How about congestion and crashes? Drivers and non-drivers alike are affected, just as everyone is affected by the security risks of our transportation economy’s dependence on such a volatile resource.

Klein refers to  calculations from experts like Ian Parry – a senior fellow at Resources for the Future - which indicate that when all these hidden but quantifiable costs are accounted for, gas prices should rise by about $1.65 per gallon.

But still, that’s not enough. What about the unquantifiable cost of dedicating so much of our military policy to securing oil resources? Even more unquantifiable is the cost of the lives of all the living organisms that are dying in the Gulf.

Unfortunately, though, even if we could price gas more appropriately, it probably wouldn’t change people’s driving habits too much.

Klein quotes Parry, who points out that for now, we’re kind of stuck on our oil dependency: “We don’t have any substitutes. Even if we hugely increase the price on oil, we’d only have limited impact on it. People need to drive and get to work.”

Of course, higher gas prices would still bring benefits:

Increasing the cost of oil could make other energy sources cheaper in comparison, and if the mechanism were a tax that would fund development of alternatives, that would hasten our transition. But it is the speed with which we can discover and refine those alternatives, more than the price of oil, that will decide our energy future.

So now that we’ve established that gas it too cheap, we need to answer a more pressing and practical question: how much does anything that can replace gas cost?

To read Ezra Klein’s full article, go here.

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