Gas Prices: Fool Us Fourteen Times, Shame on Us

May 26th, 2011



The gas price debate in the U.S. is a lot like the movie Groundhog Day. Fourteen times over the last 25 years, we have woken to gas prices in the United States have jumped by at least 5% between the months of March and June. Each time, Americans feel more and more of a pinch on their wallets. And each time, policymakers roll out the same stale and ineffective solutions. While calls for more drilling or releasing the Strategic Petroleum Reserve may make for good sound-bites, these proposals would do little if anything to reduce oil prices.

Reasons vary for oil price increases, but America’s underlying reliance on oil for transportation fuel, and its impact on our economy, remains the same. Few drivers have a genuine choice of fuels — petroleum owns a virtual monopoly. That keeps us at the whim of global oil prices.

This is a long-term problem that, unfortunately, requires a long-term solution. Instead of taking steps that might marginally impact the price of oil for a short period of time the U.S. needs to accelerate the innovation and commercialization of other transportation fuel options. This isn’t a set of pie-in-the-sky ideas: electric and natural gas vehicles are already on the road, and researchers are making great strides in developing advanced biofuels.

Many on both the right and the left in Washington continue to fixate on expanding domestic supply or investigating speculation or price gouging as the explanation for high gas and oil prices. Like eating cotton candy to stave off hunger, these solutions may momentarily satisfy, but they do not solve the underlying problem. In reality, there is little that U.S. policymakers can do to immediately impact global oil prices.

However, there is a great deal we can do to have a lasting impact on reducing demand for gasoline. Companies and researchers are developing the technologies that will give American drivers the same choices for fuel that they have for virtually every other product they purchase. But because the technologies are new and competing against a fuel and infrastructure with a 100-year head start, these fledgling industries need assistance to correct for the market’s failure to encourage innovation and create competition. This means setting standards for electric vehicles and building-out the infrastructure to alleviate consumers’ concerns that they won’t have any place to recharge; expanding the use of natural gas for fleet vehicles so that goods and services are not as vulnerable to the price of oil; and developing advanced biofuels that do not impact food prices.

For the last 100 years, the only choice Americans have had in filling up their cars is between gas stations. In an era of cheap oil and gasoline, that wasn’t such a bad strategy. But now, the era of cheap gas is over, and we need new solutions. Making real policy changes to encourage alternative fuel sources could have a lasting impact not only on how Americans fill up the tank, but on how we choose to get from point A to point B.