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January 12, 2009
The downside of lower gas prices
Drivers received an early Christmas present in the form of lower gas prices - much lower. It's at least a small consolation for the recession. But are there any negatives that come with these lower prices for motor fuel? Listen
Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:
"Well, there is a negative, and it is that I think it is slowly taking our focus away from improving our fuel efficiency and looking for gas alternatives. The economics are very simple. Why were people so interested in alternatives to gas and why were people so interested in buying fuel-efficient cars when gas was $4 a gallon? Well, because they wanted to save on that $4-a-gallon gas. They wanted to find something that was cheaper or some vehicle that got more miles per gallon so they wouldn't have to buy as much gas. Well, now that gas is lower, it makes common sense - it's not saying we're bad people - but it makes common sense, we're going to take our eye away from that. It's just not as important. So we're already seeing, for example, reports that some ethanol plants around the country are now struggling. They've shut down. There's not as much interest in fuel alternatives. So in some sense, you can say that our push to find alternatives, clean alternatives to the internal combustion engine and to fueling that internal combustion engine, is one of the casualties of lower gas prices. I don't think public policy wise we're going to do anything about this now because of the recession, but it is something I think our policy makers will eventually have to confront. If you have these gyrations in gas prices over time, it really sets you back in ultimately finding alternatives to gasoline and oil."
Posted by Dave at January 12, 2009 08:00 AM