« Are the Europeans lazy? | Main | What's the optimal inflation rate? »
September 04, 2008
Should we have an oil floor?
A bit of a smile has come back to drivers, as falling oil prices have pushed down gas prices at the pump. Many economists have attributed this pull back in oil prices to drivers buying less gasoline when pump prices become so high. However, if we've done good things like drive less and become more energy efficient as a result of high gas prices, will this behavior end when gas prices dip? Should the government, therefore, put a floor on oil and gas prices? Listen
Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:
"Well, this a very important question, and it's not a new question, but I think it's one you're hearing more and more now that gas prices have started to go down. Many economists, for example, are predicting that we can see gas prices down in the low $3 a gallon. And it's just human nature - it's economic human nature - that when gas prices go down, people will drive more. People will be less prone to buy those fuel - efficient cars. They'll be less willing to carpool, etc. And so there is a buzz about - especially in policy circles - about, well, maybe if we think these gas saving behaviors that we're doing now are good for the country in the long run, should we put some kind of a floor on gas prices? Maybe the federal government should say, for example, well, we're not going to allow gas prices lower than $3.50 a gallon. Now, obviously that would collect more revenue for the federal government. What could they do with that revenue? Well, they could build more roads, more mass transit or invest in energy alternatives or the money could be returned to households in a way that is not related to how much gas they're buying but doesn't make the average household any worse off than a tax increase, so this is an important question. It's not going to be resolved any time soon, but I think you're going to hear it discussed more and more."
Posted by Dave at September 4, 2008 08:18 AM