Saturday, January 10, 2015

Riding the Energy Rollercoaster

This past Wednesday I was able to buy six gallons of regular gasoline for less than $10. I was gobsmacked.

For years now I've mostly been hoping to see prices at the pump begin with the number two instead of three, but for some reason there must be a glut right now. On top of that, Missouri and Oklahoma lead the nation in low gas prices. While I get it that Oklahoma is an oil producing state, why Missouri—especially northeast MO, which is the corner of the state that's most removed from OK oil wells? It's a mystery.

To be sure, I don't drive much these days (the last time I bought gas was Thanksgiving) so this precipitous decline caught me completely off guard. While the pumps in Kirksville MO (my destination Wed evening) were offering regular at $1.92/gallon, I was able to further press my advantage by doing some food shopping at the local HyVee, which offers gas discounts based on what you buy. My grocery purchases that evening resulted in a further discount of 32 cents per gallon, bringing my actual price per gallon down to $1.60. It was like winning the lottery.

While happy about my good fortune, I have mixed feelings about it.

On the one hand, I love benefiting from a bargain, and I'm pleased that drops in the price of crude oil are being passed along to consumers (rather than resulting in windfall profits for gas refineries).

On the other, it's crazy that gas is this cheap. I figure lower prices now presage higher costs tomorrow, resulting in amplified peaks and valleys—all of which make it harder to budget and give us false hope about oil reserves relative to energy consumption.

I believe we desperately need to be on a diet—especially in the energy profligate US—and it's hard to make headway when we experience these enticing troughs of cheap gas, encouraging us to put our collective heads back into the sand (and I don't mean tar sand). We need to learn to drive less, ride share more, and buy cars that get better mileage. Cheap gas undercuts the momentum to support these lifestyle changes.

Transportation costs have a profound impact on markets. When gas prices are low, it's easier for distant manufacturers to compete locally (giving an advantage to both bigness and wage differential). When gas costs are higher—which is surely our future—then there's an advantage to locally produced goods (which are shipped shorter distances) and you can pay better wages without losing market share. So higher gas prices tend to help locally owned businesses that produce goods, as well as companies whose services must be delivered live as opposed to digitally or virtually.

In addition, stronger local businesses are directly linked to greater resilience when buffeted by the vagaries of economic booms and busts, because neighbors are the bread and butter market for local businesses and that personal link is broken (or at least compromised) when corporate headquarters are several states distant and are managed by faceless executives for whom you are consumers, not people.

So bring on the higher gas prices! At the least we might go as high as Europe, where prices average 2.3 times what we pay in the US—not because crude oil is any more expensive there, but because they tax it that much more to encourage conservation of a dwindling resource. To be sure, I get it why it's politically expedient to suppress taxes and that politicians tend to be notoriously short-sighted (seeing no further than the next election), but how prudent can it be accelerating into a brick wall?

1 comment:

Raising Clarity said...

I feel so strongly about this, Laird. I so agree with you.