Short term thinking

The price of gas has dropped about $1.50 per gallon in the past couple of months. The other day I paid $1.85 per gallon for regular unleaded. Inflation adjusted, that would be like paying $1.35 in the year 2000. Not an historic low (I paid 95 cents per gallon back in November 2001), but it’s down almost 50% since June.

With that reduction in gas prices, people are already thinking about how to spend their savings. Car dealerships are reporting a large jump in sales recently, and buyers are citing the low price of gas as one reason for their purchases. And it’s not the economy cars that are selling. No, people are buying big ol’ gas guzzlers, conveniently ignoring that the price of gas is volatile and quite likely to climb back to $4.00 per gallon as quickly as it dropped. It might be a year or more before the price goes up, but it will go up. I will have no sympathy for those who, two years from now, complain that they can’t afford the payments on their SUVs or to buy gas to drive the silly things.

Not that I expect people to do anything other than what they’re doing. It seems most people will spend just a little more than they can afford on a car, regardless of what they really need in a car. Why spend only $15,000 on basic transportation when you can spend $30,000 on a cool new whiz bang monster SUV with all the bells and whistles? After all, the finance company wouldn’t let me borrow more than I can afford. Right?

Politicians, too, aren’t afraid to say and do stupid things in response to this latest drop in the price of gas. Democrats and Republicans alike are making noises about instituting a “carbon tax” on gasoline. To the tune of 40 cents per gallon! The argument is that gasoline is under priced, with the price not reflecting the full cost of the product. That is, the damage done to the environment by burning the fuel. One is supposed to believe, I guess, that if such a tax were instituted, the revenue would go towards some method of combating climate change.

The truth is somewhat different. Republicans are looking at an increased gas tax as–wait for it–a means of reducing income taxes. This is one of the best examples of double think that I’ve seen in a long time. Conservatives who historically look at any new tax or reduction in tax deductions are seriously saying that taxing consumption rather than income is a solid “conservative” principle that they’ve been advocating forever.

Now I’m not saying that Democrats would necessarily use that additional revenue to combat climate change. No, they’d be more likely to put forth bills that fund all manner of additional social programs, few of which have any chance of doing anything but making people think Congress is Doing Something About The Problem, and most of which no different than programs that have failed in the past.

It’s all a bunch of short-term thinking. Knowing how Congress works, they would project revenue based on consumption of gas at the current price, without taking into account that consumption decreases as price increases. Adding 40 cents per gallon will immediately reduce consumption, and the inevitable price increase in the next few years will reduce it even more. Any proposed legislation to squander the ill-gotten gains would be dependent on the projected tax revenue, and when that revenue decreases those programs would be under-funded.

What Congress should do is … nothing: let us consumers enjoy this temporary respite from the high price of gas. Let suppliers sort things out, and when demand increases or the Saudis decide they need more money, the price will start going up again. But Congress is money junkie with all the self control of a drug addict. The primary difference being that we prosecute drug addicts but we condone and even encourage Congress’s addiction even though they do way more harm than good.

Environmental groups should concentrate on encouraging more sustainable energy supplies, and ignore the temporary increase in fossil fuel usage. The sooner we burn all of the readily available fossil fuels, the sooner their alternative energy sources will be in demand. If the environmentalists’ projections are right in regards to climate change, a few years’ increased consumption isn’t going to make much of a difference anyway. They might as well spend their limited resources (time and money) on developing alternatives rather than on fighting a losing battle against consumption.