As per usual, government is using policies to control the market.
The Environmental Protection Agency and Department of Transportation recently completed the fuel-efficiency standards. Don’t get me wrong, the new standards are good for our fight against oil dependence and encourages the inclusion of renewable energy sources — we can’t burn fossil fuels forever.
But one of the secondary effects will be a government-influenced gas price increase, though no one in D.C. will say he or she supports the raise.
Steven Chu, secretary of the Department of Energy, spoke to Congress in February, saying his department’s goal “is to decrease our dependency on oil,” by “working to promote alternatives such as biofuels and electric vehicles.”
How he plans to do it is through raising the price of gas.
In 2008, Chu told The Wall Street Journal, “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.”
He found a way, all right, and it’s not good that he did – Chu is a walking contradiction.
We should never want to be like Europe — we eat American fries now, remember?
Because secondary effects are not immediately observable, Chu hopes his plan slips under everyone’s nose. And although an increase in fuel-efficiency is needed, higher gas prices are not.
The price of gas in Europe is equivalent to around eight U.S. dollars.
The whole idea emerges from basic economic principles: the higher the price of a good, the fewer consumers. So, raise the price, and everyone will suddenly stop driving, right?
But the not-so-basic principle of elasticity shows that gas is one of the most inelastic goods today — an increase in price will not drastically reduce the number of consumers.
As the market has repeatedly shown, gas-guzzling vehicles are preferred over the electric and hybrid competition. It should come as no surprise, but for the last several decades, Ford’s F-Series has been the overall best-selling vehicle in America.
However, the new standard forces automobile companies to make more fuel-efficient cars — a product not in high demand.
How does one sell a product no one wants to buy?
In order for a demand to exist, there must first be an incentive to purchase the good.
And the government will not leave auto companies in the mess they’ve created — reference the GM bailout.
So, doing what the government does best, taxes will be used to increase the price of imported oil until domestic oil is more favorable.
Add another tax on the cost of drilling in American soil, and the government has officially gained control of how much you suffer at the pump.
Sure, an increase in gas prices will raise the demand for fuel-efficient cars, but they will cost more. With our economy in its current state of suck and unemployment rates comparable to the Great Depression, people cannot afford to purchase a new car.
Therefore, most of us would be just as dependent on gas as we are now. The only noticeable change would be the size of our wallets.
If the government leaves gas prices alone, over time, the market will push us into fuel-efficiency.
If electric and hybrid cars are not in demand now, the price will drop. So, as the cheaper, more fuel-efficient option, more people will buy them.
The only difference is that people will buy them when they can afford them.
Taylor Hammons is a 19-year-old mass communication sophomore from Atlanta.
