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February 04, 2008

The pros and cons of high gas prices

Three-dollar-a-gallon gas is back, and experts don't see any big breaks in this price soon. But it seems we have almost a love-hate relationship with gas. We want gas to be cheap, but we also want to use less of it for environmental and national security reasons. Can we have it both ways? Listen

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Well, many people think we can, but here comes an economist who's going to throw cold water on that. I'm going to say probably not because what's going to happen is, you're going to run up against one of the mainstays of economics called the 'Law of Demand.' Now this is not a law that was passed by legislators, but it is just a description of economic behavior. And the simple fact is that people use more of something like gas when the price is lower, and they use less of it when the price is higher.

"So if we look at the recent big rises in gas prices, we do see that people are starting to change their behavior. In fact, gas consumption is rising at a slower rate. People are beginning to look more at better fuel consumption on the vehicles that they are buying. Some people are even considering carpooling and mass transit. So high gas prices do motivate conservation. And they motivate people in the industry to explore other alternatives, other ways of fueling our cars and using energy. So this is the benefit of high gas prices that it does contribute to our concerns, if you will, about the environment and the use of energy. But of course along the way we are going to be gritting our teeth because on the other hand, we don't like those high prices coming out of our wallets."

Posted by Dave at February 4, 2008 08:35 AM