Oh No! Gas Prices Are Falling!
Every time the price of oil drops, the demand for that same product increases and the demand for alternate fuels, decreases. Why are gas prices falling?
China Daily reported that “oil dropped more than 6 percent to below $88.00 a barrel on Monday as a global market rout churned concerns that faltering fuel demand could slow further.”
In other words, we aren’t buying enough, so it’s time to lower the price. But can anyone other than the people vested in that market honestly say that we don’t use enough oil?
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In his new book “Hot, Flat, and Crowded”, Thomas L. Friedman writes “When I asked Rick Wagoner, the chairman and CEO of General Motors, why his company didn’t make more fuel-efficient cars, he gave me the standard answer: that GM has never succeeded in telling Americans what cars they should buy.” Thomas goes on to say , “But what the Detroit executives never tell you is that one big reason the public wanted SUVs and Hummers all those years was that Detroit and the oil industry constantly lobbied Congress against raising gasoline taxes, which would have shaped public demand for something different.”
European countries have been imposing high gasoline taxes for years, and when I was serving in Germany in the early 90’s, a gallon of gas was $6.84 a gallon, and that was 20 years ago! The result is that European countries have demanded smaller and smaller cars.
As of this writing, Gasoline in Denmark is about $9.00 a gallon, compared to $3.65 in the United States. (Up from $2.50 a year ago and down from $4.50 two months ago.) It seems like $9.00 a gallon gas in Denmark would decimate it’s economy right? Since 1981, there economy has grown 70 percent while energy consumption has been flat. In 1973, Denmark got 99 percent of it’s energy from the Middle East. Today, it gets zero.
We’ve become spoiled in the United States. We have grown up thinking that the oil that runs everything from our cars to our industrial complex, is cheap, inexhaustible and politically neutral. But we have come to an age where we realize that oil is in short supply, expensive, environmentally damaging and a political nightmare.
So with these realizations, instead of following the success of countries like Denmark, Brazil and Germany, we continue to lower the price, to fuel the demand, to use more of what we are running out of.
The Republican saying “Drill more, use less” doesn’t work. If we want more of the same Environmental devastation, financial crisis, repeated bailouts, and political situations like wars, terrorism and starvation, then all we have to do is…nothing.
I say it’s time to raise the price of Gasoline in this country. It’s time to drive this economy toward a sustainable energy program that will benefit our economy, our lives and our environment.
Photo courtesy of WiseOwl via Creative Commons License
I agree with you that oil is a nightmare and we must reduce our dependence on it. However, we differ on how we should get there. The problem isn’t that the government is failing to impose high enough taxes and intervene, as the European countries have done. They still use oil. It hasn’t worked.
The answer lies in the technology. We won’t drive small cars with $6 gas because we’re on the road with 18-wheelers. Americans commute on big, dangerous freeways. We need large cars and trucks for hauling, pulling and safety. Let’s be honest here: the technology hasn’t been there for years because the government is subsidizing oil by fighting its battles, keeping technological breakthroughs pointless. Things are changing, and plugin hybrids are about to change the political landscape (and the financial landscape, as well).
We need the government to get out and stop stifling innovation, not continuing to meddle as they’ve done to very little benefit in Europe whilst harming the consumer and costing families millions of dollars.
Even with gas prices going down they are still relatively high compared with the average over the past five years. I’m sure many consumers are feeling the pinch, and will more so with winter heating costs.
Does anyone know what the legislation passed by the house for solar tax credits amounts to? What the scope of the tax credit is and any limitations or exclusions?
Thanks,
Will Johnston
http://www.growandmake.com
Nick,
I agree with you in that Government needs to get out of the equation and stop stifling innovation. But part of that stifling comes from keeping gas prices at a false low level. As long as gas prices are held below world averages, “The People” will not demand alternatives.
Nick:
“We won’t drive small cars with $6 gas because we’re on the road with 18-wheelers. Americans commute on big, dangerous freeways. We need large cars and trucks for hauling, pulling and safety.”
WHAT are you talking about!?!?
Have you even been to Europe1?!?!?
As a WalMart associate. I can tell you my customers are feeling the pinch. The good news is I already notice a lot fewer SUV’s in the parking lot. Also fewer are left idling in the smeltering heat of Georgia.
$3 dollars a gallon seems to be the magic number for my customer base.
Aug 2007 vs 2008 = 75 million fewer gallons of fuel consumed.
Ookii,
Thanks for the comment. I understand you’re customer base. The reason they shop there is to save money. I have my own opinions on what WalMart is doing to society, but that’s another story.
What you’re saying is the $3.00 is the magic number. But a year ago $2.00 was the magic number. Right now in most of Europe, $8.00 is the magic number. Sure, WalMart customers are hurting so much that they are leaving their SUV’s in the driveways, but I bet they are still wasting money by filling their carts with Soda, Captain Crunch, 9.00 dvd’s, and 5 gallon, buy one get one free, jars of pickles.
We are not hurting as much as people say we are.
Just a note on terminology.
A drop in the price of oil does not increase the demand for it. Demand is a curve, with different quantities desired at different prices. People buy more gas at lower prices, less at higher. The demand remains the same.
Availability of substitutes is what decreases demand. When a suitable substitute for petroleum is available at a lower price, then consumers will buy less at all prices.
Go to hell. I hate rich bastards who want to screw the rest of us for your dumbass enviro religion.
So today Denmark buys it’s oil from the North Sea producers. That is a difference without a point.
What environmental devastation? The availability of cheap energy is one big reason why civilized countries are cleaner, more heavily forested and more convenient and liveable than they have ever been before. Want to go back to horse-drawn conveyances? Talk about an environmental disaster!