The case for higher gasoline prices

With the ever increasing budget deficit the buzz in the blogosphere seems to be a case for higher gasoline prices at the pump. Some economists at academic level and politicians on both sides seem to agree that it's the right thing to do. But, it's also a very unpleasant thing to do as well.

In this blog, I will also rattle about the same and try to rationalize that decision.

First of all, regarding the debt, people of the US should be very happy that they enjoy the reserve status of their currency, had it been any other nation it will be on it's knee by now with so much borrowing and accumulating deficit and would have faced a currency devaluation.

Secondly, as one of my friends reminded me yesterday that people who seem to have an agenda or vested interest are the loudest. They may not have any clue as to how things work but they are the most vocal in expressing their special interest. Ever so confident and cocky that general public fails to doubt that they may be wrong.

So, here are the points to ponder for higher gasoline prices at the pump:

• A large portion of the money will go towards paying off the debt and the cost of quantitative easing

• Pinch at the pump will force people to start considering carpooling and using the public transports, however unpleasant it may seem, that's what the rest of the world does. You get to talk to the strangers and share a joke or two :)

• It will reduce the heavy traffic congestion in the bigger cities and surrounding neighborhoods to some extent and the time spent behind the wheels could be used more productively!

• Paying for higher gas price is more egalitarian measure than the income tax cuts or increases. Both rich and poor will be happy or unhappy to the same extent

• Right now a lot of renewable energy sources are not profitable enough to be commercially viable because of the low gas prices and many of them, say, solar industry enjoys a tax break as well. Higher gas prices will make these renewable energies more profitable and gradually start to replace some demands of conventional energy sources. Among the renewable sources, algal oil is my favorite. It follows the physical principles of hydrocarbon fuel generation but reduces the time taken to produce them(thanks to the algae) through natural processes.

• Not to mention but it will also reduce the dependency on foreign oil and the need to support despots and dictators around the globe sitting on a pile of natural oil abundance and making money out of insatiable demand from US consumerism and probably using that money to buy arms and ammunitions(probably from US companies) and training terrorists and mis-informing and brainwashing the local population and fueling anger against the United States!!

• People will start considering working closer to home and thus demand of those housing will increase and house prices closer to offices will appreciate in price and those farther away will go down in demand and lower the prices, bringing it back to the natural state of stability. Building of high rises will also increase as a result, wherever possible.

• If any consolation, high gas prices is what other developed countries are paying as well, and for a while, including the nations where they have oil reserves, case in point, Norway.

I remember speaking to a top level executive at a consulting firm in Germany and he mentioned that he prefers to travel with his colleagues in train rather than driving and he said he is not an exception and people do have a sense of awareness about not to drive unless absolutely necessary.

Lastly, the 'selfish' side of me can start boasting of owning a hybrid vehicle that I purchased back in 2007. Whoever has seen the documentary 'Who Killed the Electric Car' knows that it was not about technology but about politics that electric cars did not make it sooner.

Now, this is a mind shift and change of strategy because a lot of money was invested in the past to develop the freeway system and public policies encouraged urban sprawl and owning big houses in the suburbs and the car companies & oil companies lobbied enough to drive the public policies accordingly. It was a win-win for people who were winning!!

People will need to get used to living in comparatively smaller places if they want to live closer to office. If you read this article where an average house size is compared among the developed nations you won't feel bad. Also, historically speaking US is no exception either, because, according to this link, the average home size in the United States was 2,330 square feet in 2004, up from 1,400 square feet in 1970. One would wonder why! I have some thoughts which I need to write up some other day.