Gas prices below $3: Are we being played?

Sylvia Tognetti provides a bit of perspective on Peak Oil and the way we are being played by big money and power (yes? no?). Tognetti builds the case from work by and discussions with Daniel Bromley:

No surprise that gas prices are back down below $3/gallon. It's election season. In addition, the debate about whether humans are causing global warming is so over, and, combined with the looming threat of Peak Oil, has provoked serious discussion about the development of alternative energy sources. Now I wonder if that momentum will continue. A few months ago, I had the opportunity to hear a talk by Daniel Bromley - a highly esteemed institutional economist based at the University of Wisconsin. Afterwords he also let me know about an interview he had just done on NPR on the subject of global warming (that you can find here - he joins the conversation in the second half of the program), in which he makes an interesting observation about gas prices, as well as a not so modest policy proposal that would reduce greenhouse gas emissions as well as cure sprawl and protect what little we have left of forests, farmlands, wetlands and healthy streams.

The argument Bromley makes about gas prices is that production rates seem to be adjusted to keep prices at the breaking point, which seems to be about $3/gallon. As serious public discussion begins to be generated about public transportation and alternative sources of energy, the price goes back down, as does the level of interest in developing alternatives. Venture capital simply will not flow into the development of new technology and infrastructure unless there is a consistent set of signals that carbon based fuels will be more expensive in the future. In other words, as he put it, we are all "being played like a cello." (You can find graphs and numbers here, in slides he uses for his course lectures.) However, if peak oil really hits without leaving time for a transition, I imagine that gas prices will just keep going up because there won't be any choices available.

Note to those whose political memories only go back as far as the Reagan administration: we might have had time for a smooth transition had the momentum from the oil crisis in the '70s been sustained, which led to several renewable energy initiatives during the Carter administration. But Reagan pulled the plug on all of that and a lot of smart people who one worked to develop alternative energy sources were forced to change their careers. There is a reason for disgruntled baby boomers... Lets learn some lessons here and change the tape - or turn off the automatic repeat button. …

According to Bromley, research suggests that a 10% increase in the price of gas would reduce gasoline sales by 2.5%. Therefore, a 10% a year increase in gasoline taxes over a 10 year period - which could be earmarked as a dedicated fund for mass transit, would reduce oil consumption in an amount equivalent to that which is now imported, bring prices in the US into line with those now paid in European countries, make public transportation a more appealing option than driving a car, and perhaps even cure sprawl. In fact, the Washington Post reports that with the increase of gas prices and clogged roads, there has also been an increase in the use of public transportation, even in the distant suburbs that have patchy routes. … In some areas, use of public transit has doubled since 2000, after having dropped in the 1990s, largely because of increases in gas prices, but also because of congestion and because more employers have begun to subsidize use of mass transit just as they have parking costs.

Unfortunately, politicians find it much easier to be "for the environment" and "against global warming" - and to arrive at campaign events in hybrid vehicles - than to take a stand in conflicts and controversial policies about future development patterns, particularly when they have constituents stuck in traffic who just want another road. Never mind suggesting anything that remotely resembles a tax on gasoline - an immediate campaign show-stopper. Then there are those who resist redevelopment to higher densities in older suburbs that are now adjacent to subway lines... According to a friend of mine who builds houses, this is politically impossible and is one of the reasons developers build sprawling suburbs - so as to avoid the expense of fighting with owners of existing houses who don't want any more backyards anywhere near their backyard. But actually making some contentious decisions about development patterns and improving mass transit is the key to actually doing anything about global warming and environmental protection. And the longer difficult choices are avoided, the fewer of them we will have to make.

Since I'm not running for anything myself, I'll say what candidates can't - and also get elected. Gas prices should go up faster….They will go up one way or another. If they go up because of a gas carbon tax, rather than a price increase, we will have a source of funds for mass transit. If not, the oil companies make out like bandits. The question is whether we are capable of taking a proactive approach to policy by recognizing trade-offs and actually making a conscious decision rather than looking for silver bullets. …

Comments

[PeakEngineer]

I'd say that's about right -- we're being toyed with and no politicians are strong enough to put up a fight. The signals are clear, but there is no action.