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Monday, June 30, 2008

Gas prices are getting boring

Is it just me or is anyone else getting bored with all the talk about gas prices, especially in the econ blogosphere? I mean, I'm not any happier than the next person about paying over $4.50 a gallon but I guess I just don't care anymore about why gas prices are so high (and seeing a bunch of different blog posts about whether it's due to speculation, all linking to the same debate going on between two other bloggers is just not interesting). I just want to know when other markets are going to catch up and provide good alternatives!

I hope to get back to posting more regularly soon...


  1. While I realize I am commenting on the very topic you seem to be slightly less than enthusiastic about, do you think the rapid increase in the price of oil has really accelerated the likelihood of seeing alternative fuel sources in the near future, or left it relatively at the same pace? I have heard many people in the oil business say that gasoline will probably never go back under the $3.50 mark.

    I also have a few more question as well; wouldn't it be smart for the government to increase the gas tax if the price in the world market ever fell significantly?, and two, will we start to see fairs of trains and similar transportation sky rocket to keep the level of passengers stable, therefore making practically the 2 most viable forms of transportation too expensive for the majority of Americans?

    I guess this leads me to my big question; should the government take over all oil companies or other major transportation markets? Whats your take on that question? I realize I asked many questions, but if you can only answer one, I would like to hear your opinions on that last one.

  2. Matt: Keep in mind that I know almost nothing about transportation markets so what I'm about to say is simply based on my own impressions and could possibly be based on completely wrong assumptions. There's a whole sub-field of economics that is concerned with these issues though and I'd certainly encourage you to ask others your questions.

    That said: I have no doubt that high gas prices are increasing the demand for alternative fuels, but I don't expect prices for trains and buses to 'skyrocket', partly because I think that, at least in California, people are more likely to turn to other types of transportation (like biking, carpooling, hybrids, etc.) for local transportation than to suddenly switch to public transportation in mass quantities. That might be less true elsewhere but California simply doesn't have the public transportation infrastructure - it's not like the east coast where, for example, it can actually be faster to take the train or subway to get around than to drive. Don't forget that trains and buses are already PUBLIC transportation and, especially in California, I think private industry will come up with good alternatives long before the government gets their act together enough to invest in better transportation infrastructure. If you're talking about larger scale transportation, like airlines, I think that yes, prices are going to rise (they already are for airlines) but they aren't going to 'sky rocket' because demand in those markets is more elastic (for example, more and more people are staying close to home for vacations instead of flying).

    I don't really know much about the oil industry but I'm not aware of any good reason for the government to take over oil companies. Given that the price of oil is determined by the world market and not domestic production, I can't imagine it would do much to the price. I think some believe the oil companies are raking in huge profits so if the government took over, those profits would be returned to consumers through lower prices but I don't buy it - it just is not in the long-term interest of oil companies to let prices get so high, for so long, that people start looking for permanent alternatives that could eventually eliminate our need for oil at all. I assume that by 'major transportation markets' you mean the airlines because local train and bus transportation is already public (Amtrak is sort of a hybrid - it's government owned but privately run, I think). I think an argument could be made for re-regulating the airlines, or drastically changing the way they are handled now. It certainly doesn't make any sense to me that the government keeps bailing out some of the big airlines without at least talking about re-regulating.


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