One of the biggest economic concerns for Americans today is the continued rise of gas prices. In already difficult economic times, many families are being pushed to their financial limit by rising gas prices. According to the Brookings Institution, in 2008 “Americans earning less than $15,000 a year were spending as much as 15 percent of their household income on gasoline”. This should demonstrate the how central gas prices are to the financial well-being of Americans and especially the poor. Furthermore, beyond the direct hit to our wallets, rising gas prices can have other consequences.
As gas prices rise, they will inevitably drive up prices of other goods. We are already seeing a rise in food prices which is being caused, at least in part, by increased shipping costs as a result of higher gas prices. This is a source of great concern for all Americans and both sides of the political spectrum are quick to offer their own explanations and solutions.
Members of the Political Right are quick to argue for an expansion of drilling for oil as the solution to our problems. Conn Caroll, of the Heritage Foundation has recently written an article which lays the blame for rising gas prices on the Obama administration’s failure to increase oil production in the United States.
On the Left, the solution is often presented as a reduction in U.S. demand for oil. A new article from the Center for American Progress is calling for investment in more fuel efficient vehicles and more public transportation. This reduction in oil demand, according to the Left, will drive down gas prices and make Americans less dependent oil in general.
While the arguments of both the Left and Right have merit and may work in the short term, they both seem to overlooking the major cause of rising gas prices which is an increased global demand for oil. As nations like India and China modernize and industrialize their demand for oil will only increase. Regardless of what we do in America, the rest of the world will only demand more oil in the years to come and this will have a profound impact on oil and gas prices. In the long run, our best hope is find alternatives to oil for our energy needs through technological innovation.
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Steve Michaels
Twitter: SteveMichaels5
Not only has global demand has increased significantly, but production has remained flat since 2006!
ReplyDeleteThis is a classic supply & demand market dynamic on a global scale.
See:
ReplyDeletehttp://www.eia.doe.gov/aer/txt/ptb1105.html