Refuse to Drive

For many people, refusing to drive will not become a credible option until they are priced (forced) out of the market. With gas prices continuing to spike across America, people are beginning to ask, “What is to blame for these high prices?” There are many economic factors at play and there are more than one culprits to blame.

Find out who you should “thank” next time you take out a loan to drive to work.

According to ABC News, we should be thanking the following culprits: politicians, big campaign contributors, drivers, oil cartels, and speculators.

1. The Politicians. Congress cannot commit to a unified strategy for dealing with America’s troubled energy policy. It has the power to tax oil companies, subsidize alternative energy development, and set fuel-efficiency standards. To date, elected officials have not done a good job of exercising any of these powers. Further, it has not been been able to agree on a strategy to diversify our energy sources and ultimately decrease our dependence on foreign oil. Politicians on both sides of the aisle need to come together to pass coherent and unified energy law that will encourage alternative energy development and open up new sources of oil that minimize the impact on the environment.

2. Big Campaign Contributors. Politicians are influenced by big campaign contributors (you know, the ones paying the bills). The oil and gas industry is one of the top donors to political campaigns year after year after year. After all, in 2004, the industry donated more than $25 million to politicians. The bulk of that money has gone to Republicans in order to ensure the oil industry does not have to pay a windfall tax. Oil companies are trying to avoid these taxes because they claim their profits are needed to reinvest in their expensive equipment and to find new oil reserves. Without such investments, their business would decline. The oil companies must do a better job of explaining their case to the American public. Further, they should fund public service advertisements calling on drivers to use public transit alternatives to decrease demand as a sign of good will.

3. Drivers. Americans are addicted to cars (partly out of necessity and partly out of culture). Suburban developments have made driving to work and school a must. In fact, Americans spend more than 100 hours commuting to work each year (by themselves). If more people carpooled the demand for gas would drop immediately, in addition to that 100 commute average. Further, people should only buy cars that get 30 miles/gallon or more in order to send a message to car manufacturers: “Enough with wasteful SUVs!”

4. The Oil Cartel. OPEC sets the supply of oil that is available for the market; the more oil that is on the market, the less gas will costs, all else being equal. For example, Saudi Arabia pumps 9.45 million barrels of oil out of the ground each day (one barrel=42 gallons). If the OPEC nations decided to increase production by just 1 million barrels a day, then there could be some real relief in the markets.

5. The Speculators. Opposite supply on the market price equation is demand. Increasing demand, as supply remains constant, causes the prices to spike. Further, oil is priced in U.S. dollars. As such, when the value of the dollar falls, as it has in the past year, the price of oil goes up for Americans. In addition, speculators are pouring money into oil now because they think they can make a profit. As they continue to invest, these speculators are artificially driving up the price of oil. As such, it is hard to tell what the right price should be for the market.