Sunday, April 02, 2006
Gas Price Tipping Point
I have run across real optimists in Washington who insist that what goes up must come down, based on the price cycle of the 1970s and 1980s, but I can't see a real fall in the price unless India and China moderate their demand; Iraq comes back fully online; there is no instability in Nigeria or Iran; there is a constant move towards shifting to alternative liquids (as James Schlesinger noted in our winter 2005/06 issue, the energy crisis is a liquids crisis, the problem of powering our transporation infrastructure).
And I don't know if we are doing enough to 1) take measures to weather short-term crises and 2) to really prepare for the transition away from oil. These are issues that we will try to address in the summer issue of the magazine.
Political courage to raise gas taxes as Paul Krugman and Tom Friedman envision it, is really the political courage to raise costs for people who often live on a fairly narrow margin. Public transport is not feasible. Telling people to move where the work is strikes me as adding insult to injury. Perhaps this is another chapter in the alienation of middle America from the coastal elites.
Politicians won't raise gas prices artificially through taxes not because they lack courage, but because they have more information than the pundits. But sustained higher gas prices for other reasons that cannot be fixed politically will create economic dislocation in communities and a consequent populist backlash against whomever is considered responsible.
Bernard Munk has a recent piece on related questions of energy independence vs. energy security on the FPRI webpage that might interest readers here.