As gas prices continue to go down, most people seem very excited (at least those they interview on the local news). In truth, low gas prices are leading to two devastating problems: deflation and continued oil dependence.With energy prices dropping, it only follows that consumer goods prices drop accordingly. Although seemingly good for all of us during tough times, deflation is a problem worse than inflation. As the prices of goods drop, producers make less money and have to pay their employees less or just lay them off. This results in less cash entering the marketplace on the consumer end, continuing the downward spiral. To add insult to injury, more people are hoarding their savings in fear of bank collapse and long-term depression, resulting in even less flow of money and goods, retarding the economy.
The second problem is that of our perpetuated reliance on oil. With prices low again, people are no longer as concerned about fuel efficiency and alternative fuels. This stifles investment and progress in technologies such as hydrogen fuel cells, batteries, biofuels, and mass transit. Although people were probably sufficiently scared enough from this year's spike in gas prices to not buy any more Hummers, if prices stay low, people will forget those highs rather quickly and go back to their wasteful ways.
Even so, low gas prices do serve as some relief. High gas prices obviously take their toll on everyone, particularly low- to middle-income families. Low gas prices are a blessing to them (that is until they are laid off). The government should enact a consumption tax on gasoline, making it very expensive (at least $5 or $6 per gallon). The government would then pay households a gas stipend based on how much driving each should have done on average based on each family member's commute, proximity to mass transit and stores, income, etc. This way, families that take mass transit, drive electric cars, and carpool would make money on their stipend while families that drive fuel-inefficient SUVs and make wasteful trips would pay more gas tax then their stipend subsidizes. This would drop consumption by providing monetary incentive to not use oil and penalty to use too much of it. It would also manipulate the market to favor alternative energy and fuels, making their innovation less reliant on government handouts.
5 comments:
that whole increase gas prices seems kind of strange in this situatuation because the reason gas prices are low is because less people are buying. They simply do not have the money and what little gas they do buy is neccessary for their survival. Raise the gas prices and businesses and people would suffer greatly. AFter, all, everything relies on gas in some way these days for transportation or something and such a dramatic spike would force companies to cut a lot back because they cannot afford it and I don't think stipends will be sufficient to keep people and businesses afloat
Another point is that raising the gas tax might actually be a good thing because it might stem deflation. By making consumer goods a bit more expensive, deflation might be stalled. However, as I am no economist, I have no idea if this would actually work. Just a thought, though.
Another point is that raising the gas tax might actually be a good thing because it might stem deflation. By making consumer goods a bit more expensive, deflation might be stalled. However, as I am no economist, I have no idea if this would actually work. Just a thought, though.
I agree
Post a Comment