Should greens want lower gas prices???
A different way at looking at gas prices...
Raise the price of something high enough and you invariably lower the demand for it. That's why last year's sharp spike in gas prices resulted in fewer cars on the highways and a plunge in miles driven. If your goal is fewer SUVs, less solo driving, and lower carbon-dioxide emissions, inflicting European-level gasoline prices on American motorists is a pretty good strategy. Conversely, it is hypocritical - or at least illogical - "to say you care deeply about global warming and advocate for the price of gas to go down," as AutoNation CEO Mike Jackson told Newsweek last year. "Those are mutually exclusive concepts."
And yet advocating for the price of gas to go down is essentially what environmentalists are doing when they clamor for higher-mileage cars. All other things being equal, raising fuel efficiency lowers the cost of driving. As Secretary Chu correctly told the House committee last week, "encouraging fuel-efficient cars" is one means of "reducing the price of transportation." But cheaper driving means more driving, and more driving means more energy use, more cars on the road, more demand for highways, more drilling for oil - all the things environmentalists abhor.
If greens and global-warmists really want the US automotive fleet to use less energy, they should clamor for cars that get lower mileage. Crazy, you say? Surely no crazier than $8-a-gallon gas.
posted by GayandRight @ 1:23 PM
1 Comments:
This is a remarkably stupid argument. Any first year economic student could tell you why it's wrong.
Cost equals price times quantity. Increasing fuel efficiency reduces the cost of transportation--primarily--by reducing the quantity of gasoline required for transportation, not the
price.
Yes, the decrease in demand created by more fuel efficient cars might then produce a second order decrease in the price of gasoline but that decreased in price would be predicated on a decrease in DEMAND!
Price is a dependent variable produced by the intersection of supply and demand. If new technologies were to increase the supply of gasoline (the total amount available at any given price), then prices would drop and people would consume more gasoline. But if there's a decrease in demand for gasoline (note: gasoline, not transportation) then the quantity demanded falls and that produces the decrease in price, not the other way around.
For example, if new developments in technology make video cassette recorders cheaper to make (an increase in supply) then prices will fall and you'll start to see every household buying a VCR (as opposed to just TV stations and industry professionals). That's how a "decrease in price" (really any increase in supply) leads to an increase in consumption.
Fuel efficiency, however, has by definition a demand-side effect--not a supply-side effect. Increased fuel efficiency is like everyone deciding to buy PVRs or DVD players instead of VCRs. The drop in demand for VCR MAY result in a decrease in price (it will, assuming there are no losses due to decreased economies of scale), but that doesn't result in an increase in the total number of VCR that are sold. It's a demand-side effect, not a supply-side effect.
This is all just basic economics that no one right or left would disagree with and I'm surpriused the Boston Globe would print something like this.
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