Saturday, May 17, 2008

Higher Gas Prices: A Blessing in Disguise or America's Wakeup Call

Higher gas prices have got Americans driving less and public transport has never been this busy - A blessing in disguise?

Gas prices have been too low for too long. The American public demanded and received cheap gas and is slowly undergoing an adjustment process as the result of dramatically increasing gas prices which can no longer be held at bay by any means.

With oil prices climbing to $130 a barrel, and with no end in sight, the economy suffers as higher gas prices take their toll in the form of higher transportation, manufacturing and energy costs.

Gas prices at $4. $5 and maybe $6 a gallon are now very significant to any household’s budget and considerations.

However, I can help but notice the many blessings and advantages higher, or more real, gas prices will have both in the long and short term.

Higher gas prices carry significant advantages

#1 Reduced Waste

The NY Times reports more and more drivers are abandoning their cars in favor of public transportation or mass transit. Apparently buses are getting crowded and so are the parking lots near railway stations and bus stops.

In cities like New York and Boston where the mass transit systems are developed there has been a registered increase of over 5% in passengers. In South and west cities an even more dramatic increase has occurred (the NY Times reports an increase of 8% in passengers in Denver with increases registered also in Minneapolis, Seattle, San Francisco and Dallas).

Furthermore, February was the fourth month in a row that Americans registered a decrease in car travel distance according to the Federal Highway Administration. Apparently 60% of Americans are intent on lowering their gas consumption.

Gas prices in the USA are amongst the lowest in the world. The following chart lists gas prices from around the world:

$4 a gallon seems less expensive now, doesn’t it?

#2 Reduced pollution

The immediate result of increased use of mass transit and fewer distances traveled by car will be a reduction in pollution. It might not be significant but I believe it will surely be felt in the bigger cities and urban centers.

Hopefully, higher gas prices will also result in a new trend encouraging American drivers to switch their cars to more efficient, and regrettably smaller, cars.

US vehicles have ranked bottom in world fuel efficiency for years now. According to Reuters: “U.S. fuel-efficiency requirements for passenger cars have been stuck at 27.5 miles per gallon since 1985, while the standard for pickups, minivans and other light trucks will increase from 20.7 mpg in 2004 to 24 mpg in 2011. That puts the United States behind Canada, South Korea, Australia, China, Europe Union and Japan in vehicle fuel economy. The Senate earlier this year passed a bill raising America's car and light truck requirements to 35 mpg by 2020.”

There are more pickup trucks and SUV’s to be held in the US than anywhere I’ve ever been. I haven’t been able to find any of the smaller cars anywhere in the US.

#3 Increased economic feasibility of alternative energy sources

The biggest problem with alternative energy sources is their price. Solar, wind, geo-thermal and bio-diesel are costly and require massive investments in research and development. With increasing gas prices the economic feasibility of alternative energy projects has risen dramatically.

We have only our government to blame for the lack of alternative energy sources today as only a government truly sees the real economic value or cost of oil usage its alternatives. It seems the market forces are demonstrating their powers yet again with higher gas prices an excellent motivator for both governments and private investors to act on alternative energy projects.
These projects, in turn, will hopefully result in lower pollution levels, higher efficiency, less waste and a more balanced approach towards our planet.

#4 Reducing dependence on oil producing states and reducing the power of dictators in those countries

It’s no secret oil producing countries usually have corrupt regimes with many characteristics of dictatorships. These regimes evolved using the immense power oil offers as the single most valuable energy resource available to us today.

This dependence has caused many counties to make painful compromises and dubious decisions when it comes to oil and the counties that produce it.

Hopefully, higher gas prices and the alternative energy resources to come will help lower our dependence on these countries significantly. Another desired affect maybe the weakening of these regimes as their one source of power will slowly diminish.

Image by: Greg Woodhouse


Debtmentor said...

$3/gallon for gas appears to be a price of the past. Commuting/transportation has now become a major expense item in most houshold budgets ranked with mortgage, vehicle and healthcare payments.

Suzanne Morris said...

I remember the first thing I learned in my Econ class in college was that we would never run out of oil. It was a controversial statement by the professor to a bunch of ignorant students, but he was right. The more expensive oil/gas becomes, the more impetus to find alternatives. Eventually, it will get so expensive, we will be forced to find other (hopefully earth friendly, non-terrorism funding) solutions. Therefore, oil will be left in the ground.

Dorian Wales said...

@Suzanne - I agree. It might not be left in the ground but it will become a part (hopefully a small part) of a mixture of energy sources.

Anonymous said...

Although i'm in the same boat as everyone else and personally hurting from high oil prices, i agree that in the long run, it's a blessing in disguise.

We all knew that oil wouldn't last forever; it's a finite resource. It's just too bad govt leaders are too focused on the here and now to plan for the longer term.

For instance, here in CT, I drive 24 miles 1 way to work. My town doesn't have a train station, so I'd have to drive 15 minutes (1-way) to the station each a.m., that is, if i could hope to get a space in the train parking lot, where the waiting list in many towns in my county is a year or longer. the infrastructure just isn't there.

I've tried signing up for carpool or vanpool arrangements and have yet to find someone to share rides with.

and my employer stubbornly remains opposed to my working from home, even though I work as a writer and can't think of a job more ideally suited to telecommuting than mine.

Dorian Wales said...

If you can't work at home I'd suggest living close to work. I've purchased an appartment in the city. It appears costly by it saves big on gas, a car and most importantly time.

Jeff said...

This certainly is a blessing in disguise. Perhaps now we will finally develop Shale oil. There is 2-3 times as much shale oil as there is crude. On top of that, 68% is in the U.S. Essentially, once we make it profitable (estimated at $70\barrel) the rest of the world can buy from us. suddenly we are dependent on no one, we reverse trade deficits, and we can continue driving, since our country is huge compared to well, most of the rest of the world. My family lives 500 miles away. In europe, that would be several countries away. Our use is determined by our situation. Once we utilize the resources that God put on our soil, perhaps we will be able to get on to other things.