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Low gas prices or the environment: choose one


The days get longer. Trees grow heavy with leaves. And politicians yammer about high gas prices. Ah, it must be silly season again.

The goofiness of legislative proposals to lower gas prices is such that normally staid environmental economists foam at the mouth whenever this topic comes up. In an effort keep my own mouth-foaming at a minimum, I’ll present a simple bulleted list of non-controversial (to me) propositions:

  1. Gas prices should be higher, not lower.
  2. No one is “gouging” consumers.
  3. The problem is oil consumption, not oil companies.

This is pretty simple. You can’t simultaneously fight for low gas prices and fight climate change. These are opposing policy objectives. The whole idea behind the various climate change bills presently haunting the halls of congress is to raise the price of energy consumption. Although none of these bills propose a direct tax on gasoline, all of them will lead to an increase in downstream costs for consumers. As they should.

I missed the recent Democratic presidential debate, but apparently Wolf at one point asked the candidates what was to be done about high gas prices. As ever, it fell to a non-contender to provide an honest answer. Mike Gravel came out and said: nothing. High gas prices are a good thing.

Contrast this with John Edwards’ “Plan to Relieve Families from Rising Gas Prices,” a strange mash of policy proposals couched in a healthy dose of demagoguery. To be fair, elements of this plan are sensible — but only because they have nothing to do with high gas prices. In fact, many of the elements of the plan will raise gas prices.

The only credible way that the government can lower gas prices is by raising fuel economy standards for cars. Mandated efficiency measures will reduce demand for gas, and then the market will do its thing. Of course, the market should eventually do its thing even in the absence of government mandates. Given enough time, Americans will switch to more fuel-efficient vehicles. But only if gas prices remain…wait for it…high.

OK, I think I’m foaming a bit now, so time to wind down. I recognize that high gas prices cause economic pain for many Americans. I also recognize that oil companies make boatloads of money, receive lots of unnecessary government support, and are just generally unlikeable. But none of these facts are the basis for a sound energy policy. Gas prices are high because people really want to consume gas, and any solutions to our energy and environmental problems have to address — and change — that fundamental reality. Lowering gas prices is a step backwards.

Update: I am very well aware that I’m going to get flayed in the comments, but I want to at least try to head off one flawed line of criticism. Someone is inevitably going to write that oil companies are unfairly subsidized and that therefore…I don’t really know what. The logic kind of breaks down at that point. Oil companies are subsidized, and those subsidies should be eliminated. But that’s a separate issue entirely that has little to do with gas prices. In fact, eliminating subsidies to oil companies could only have the effect of making prices rise further.

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