Pumped up: How higher gas prices may ultimately help us
By Ken Moritsugu
Knight Ridder Newspapers
WASHINGTON - Motorists may find the high price of gasoline painful this Memorial Day weekend, but it could eventually improve their quality of life.
After 15 months of high gasoline prices, people say they are driving less, according to surveys. If prices remain high, people also will buy smaller, more fuel-efficient cars. Together, that should lead to fewer traffic jams and accidents, cleaner air and possibly a slowing of global warming.
The impact of higher gasoline prices, which have risen 28 cents a gallon on average since late March, illustrates an often glossed-over tradeoff in the ongoing debate about energy policy.
Low energy prices fuel economic growth and give more people the means to drive bigger cars and enjoy the comforts of central air conditioning. By encouraging power consumption, however, low prices also make it harder to breathe, shroud skylines in smog and tie people up in traffic jams - all factors that may be as important to quality of life as the comforts of economic well-being.
One answer to this conundrum: Raise fuel prices to a level that better balances economic growth with environmental costs. Gasoline prices in the United States favor the economic side of the equation too much, economists say.
Increased tax supported
While some lawmakers want to suspend all or part of the 18.4 cents a gallon federal gasoline tax this summer to give drivers a break, many economists say the gas tax should be increased instead.
"Overall, the benefits of cleaner air and freer-flowing traffic will exceed the costs of having to pay more for energy," said Ian Parry of Resources for the Future, a Washington-based policy-research institute focusing on the environment and transportation.
From an economist's viewpoint, the tax on gasoline should reflect the added costs to society from consumption of the fuel, such as health costs and time lost in traffic jams.
Based on recent studies, Parry estimates the environmental and congestion costs combined at 84 cents to $1.12 a gallon. A $1 tax would push the current U.S. price of regular gasoline up to $2.29 a gallon.
Political ramifications
Politically, any change in the gas tax - up or down - is unlikely. Vice President Dick Cheney, head of the White House energy task force, has ruled out suspending the gas tax, noting that the revenue is needed to maintain and expand roads. The prospects for raising the tax are so slim that it isn't even part of the energy-policy debate.
Market forces are expected to keep gasoline prices up for some time, though. As a result, 52 percent of Americans are driving less to save money, according to a poll released yesterday by the Pew Research Center for the People and the Press. Also, 36 percent of the respondents said they are considering buying a car that gets better gas mileage.
The nationwide survey of 1,202 adults was conducted May 15-20 and had a margin of error of plus or minus 3.5 percentage points.
A separate poll by The Associated Press found that 23 percent of Americans are cutting back on or canceling vacations because of the higher cost of gas. That survey, of 1,008 people May 16-20, had a margin of error of plus or minus 3 percentage points.
If energy prices rise high enough, they can help drive the economy into recession, as they did in 1974. Economists are keeping an eye on energy costs, but they are not overly concerned yet by the increase in gasoline prices.
Adjusted for inflation, the price of gasoline is 30 percent lower than its historic peak in 1980. While gasoline prices have jumped over $2 a gallon for short periods in some areas, the average price is about 50 cents higher than two years ago. For the owner of a car that gets 25 miles per gallon, and who drives 12,000 miles a year, the added cost for fuel is about $20 a month.
"That's significant, but it's sort of the cost of going out to a nice dinner," said James Sweeney, a specialist in energy and environmental economics at Stanford University.
Lower than abroad
The price of gasoline is lower than in Europe, Canada and Japan, all of which have higher taxes. The British pay $4.26 for a gallon of gasoline, including $3.12 a gallon in taxes.
Taxes in the United States vary from place to place, with states and some local governments adding taxes on top of the 18.4 cents a gallon federal tax. State levies range from 7.5 cents in Georgia to 29 cents in Rhode Island. On average, total taxes on gasoline add up to about 45 cents a gallon.
The issue puts some environmental groups in a bind. Many are uncomfortable advocating higher prices because of their unpopularity. Instead, they frequently bash the oil industry for purported gouging and windfall profits.
But high gas prices "should be your best friend if you're an environmentalist," said Jerry Taylor, natural-resources director at the Cato Institute, a libertarian think tank. "Gouging or not, higher prices mean less consumption which means less pollution."
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