Friday, August 19, 2005
Gas is underpriced
We seem to be on a real tear about energy at 3WN this week. Part of what we need to do is get the price of fuel to include the cost of externalities like pollution and dependence on middle east suppliers. We pay a real environmental cost in terms of dirty air from pollution and real costs in other ways (hundreds of billions of dollars and 1860+ lives at present) for getting oil from the middle east. The price we pay at the pump doesn't really reflect any of that (tho part of the price is due to current instability in Iraq). As it stands now when faced with a choice of fuel from a foreign source at, say, $2.50 a gallon or fuel from, say, Minnesota corn farmers at $2.60 a gallon an economically rational consumer will choose the former every time. I have no doubt that 3WN readers are likely to choose differently out of principle but you get my point. If gas reflected not just the price of getting it the pump but also the damage it does to the environment and the cost borne by the US of keeping its supply available to western markets we could just let consumers acting in their own interests solve a good part of our current problems. One of the moments I was most proud of having voted for Bill Clinton was listening to a State of the Union address where he explained the benefits of a carbon tax and how it would work. Here was a guy who really understood how markets worked and how to harness their power. Conservatives should be all over this sort of free market solution, why aren't they?