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Gas Prices.. Not high enough? May 26, 2007

Posted by The Armchair Economist in Commentary, Economics, Politics.
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gas.jpgIts interesting how even with gas prices at the levels they are, people haven’t really cut down on driving. For example, AAA says that this holiday weekend, the average traveler is going to drive 1.7% further than they did last year. Even though an AP poll shows that more than half respondents say that gas prices is a ‘serious hardship’, fewer people are reducing their driving, trimming their expenses, or curtailing vacation plans <source: AP News>. This brings up some questions about about just how inelastic the pricing is in gasoline markets, at least with our society. Just how much consumption are we willing to forgo (well, with Americans perhaps how much more debt we are willing to incur is more appropriate) in order to keep our SUVs on the road and to keep taking those All American road trips?

Maybe we should raise gas taxes, increase them until demand starts to decrease and use that money to attack Iran and Saudi Arabia (bring freedom to these poor repressed people, i say!). Then surreptitiously install a puppet democracy guaranteeing that we have enough oil to use for the next 20 years. Ok, I’m kidding. Perhaps we can put that money into a rolling jackpot for the inventor of the next scalable renewable alternative fuel. Imagine, in 2004 the US used 140 billion gallons of gasoline <Source: US Dept of Energy>, put the tax at a conservative $0.10 a gallon (IMHO not nearly enough to move demand), at $0.10 tax/gallon thats 14 billion dollars per year until a solution is found! Boy, i bet that’ll get us a new energy source within a decade!

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