To some, high gas prices have a silver lining
A sprinkling of experts and consumers welcome paying extra at the pump.
When Jim Cunningham pulls into a gas station, his fondest hope is that prices will have risen. Instead of $3.25 a gallon, he'd rather pay, well, $4 a gallon – or more.
"I just like the positive impact high gas prices are having on public consciousness – like getting people to buy more fuel-efficient cars," says the industrial-package designer in Denver, who spends $50 to fill a gas guzzler that he hopes to unload soon.
Hank Leukart, a Seattle travel writer, pays about four times more for gasoline today than he did nine years ago. But "I love high gas prices," he wrote in a blog essay last year. In the long run, "high gas prices have so many good repercussions [in the form of less traffic, accidents, air pollution and a boost for renewable fuels] that the temporary loss of expendable income seems worth it."
Such views aren't limited to drivers. Across the American landscape, a sprinkling of economists, authors, bloggers, and pundits are making the case that there's a silver lining to high gasoline prices. Instead of pain at the pump, they see payoffs: less traffic, fewer accidents, reduced air pollution, better efficiency, more reliance on renewable fuels, and less dependence on foreign oil.
While most motorists may wonder whether these iconoclasts are sitting at the wrong end of the tailpipe, they're nevertheless reviving debate over a long-dormant idea – boosting federal gas taxes so that pump prices stay high. Permanently.
"People use vehicles less or buy smaller, more efficient cars the longer prices stay high," says Ian Parry, an economist at Resources for the Future, a Washington think tank. "They put greater demand on manufacturers to produce more fuel-efficient vehicles, which, in turn, cuts oil use and reduces greenhouse-gas emissions."
Of course, there's a downside. High gas prices act as a drag on the economy. The more they rise, the more consumers have to spend on fuel and the less they have to spend on other goods and services. The effects are also uneven. People who drive a lot and the poor feel the pinch more than the average consumer. Such costs are regrettable, high-price proponents say, but pale in comparison to the gains that can be had – and can be somewhat compensated by federal tax rebates. The key, they say, is to keep gas prices high enough long enough to force permanent change.
That didn't happen in the last price spike. After soaring in the 1970s and early 1980s, gasoline prices plummeted due to expanding supply. Falling prices torpedoed public support for further fuel efficiency.Today, the US auto fleet is less efficient: 25.4 miles per gallon versus 26.2 m.p.g. in 1987.
"Had we been able to keep gas prices up throughout the 1980s, the nation would be far more fuel-efficient today," says Frank Zarb, who was the president's chief energy adviser during the Ford administration, now managing director at Hellman & Friedman LLC,, a private equity firm.
The backsliding could happen again, some analysts warn, if gas prices plunge.
Under pressure from competitors and Congress, US automakers say they will produce more high-mileage models.
High gas prices may not only be desirable, but vital, says John Sterman, a professor at the Sloan School of Management at the Massachusetts Institute of Technology in Cambridge. A recent study he co-wrote found that sustained high gasoline prices are a critical factor in developing US markets for alternative-fuel vehicles. But prices would need to go up to and remain at European levels of $4 to $5 a gallon, he says.
In the US, however, gas prices typically soar, then sink back – but to levels higher than before. That lulls the public into feeling price hikes are temporary despite the long upward trend, economists say. To ensure that gas prices send a long-term "price signal" to consumers and industry, some economists are calling for a gasoline tax of 50 cents to $1 per gallon – on top of today's 18 cents per gallon federal tax.
Revenues from such a tax could be used to develop new energy technologies, with most of it returned to US taxpayers in the form of income-tax refunds. Such a tax would hit those that drive more miles for work and low-income drivers the hardest. Even so, economists say it should be possible to target refunds to them.
"There is indeed a bit of a silver lining to higher gas prices all by themselves," says N. Gregory Mankiw, an economics professor at Harvard University and former chairman of the President's Council of Economic Advisers from 2003-05. "But high prices by themselves are not as attractive as if those prices are higher because of taxes – because unlike our government, the Saudis aren't going to give you a tax rebate."
Energy-security experts say a gas tax could in the long run replace some of the costs taxpayers already pay – but don't see at the pump – to maintain military forces that keep global oil lanes open. Yet the gas-tax idea is a "third-rail" for most politicians, who fear nobody would support it.
Well, maybe not nobody. A February 2006 New York Times poll showed 85 percent of Americans opposed a gasoline tax, but 55 percent favored it if it would cut reliance on foreign oil, and 59 percent supported it if it would help curb global warming.
"It's like tough love," says Mr. Cunningham in Denver.