Of all the terrible and misleading measures and statistics used to discuss the economy (GDP, the NYSE composite index, Consumer Confidence), the price of gas is among the worst.
Unlike many economic measures, gas prices are not a composite or abstract metric. They have the virtue of being tied to something tangible, which has a real impact on the lives of everyday Americans. But gas prices are not a constant because there are great regional differences —according to AAA, prices range from $4.55 in California to Oklahoma $3.01, a 51 percent difference— and there are also great variations related to where people work and how they get there.
The current price is also a relative figure. Since 2001 the price of gas has about doubled, even though inflation for gas has been lower than other sectors, especially health care and education. The recent increase has resulted in part from the historic lows that occurred during the pandemic-induced recession. Simply put, when the economy lags, the cost of oil and gas go down. In that sense, this increase can be seen as a return to normal and a positive development.
Yet these are also not large sums. The national average of $3.39, up from $2.15 a year ago, a 57.67 percent increase. If the average American drives about 13,474 miles a year, which at, say, 37 miles per gallon, that’s 364 gallons, or an additional $1.24 per day.
Compare that figure with the billions Americans spend on sugary beverages, alcohol, and cigarettes. If we’re going to be serious about climate action, people are going to have to pay the real cost and use more non-renewable forms of energy.
There are also political calculations at work, and it doesn’t help that President Biden has failed to articulate a coherent position on the matter. Republicans speak about “consumers’ buying power,” which is a convenient talking point but doesn’t suggest action of any kind.
Is anyone really asking for more subsidies? A report earlier this year from the International Monetary Fund revealed that global fossil fuel subsidies hit $5.9 trillion in 2020, a figure that is only expected to rise. The U.S. government contributes $730 billion to that figure. This says nothing about the trillions of dollars the United States has spent over the last three decades having a presence in the Middle East and ready its oil reserves.
What about tax cuts? Federal and state taxes account for 22 percent of the cost of gas. The bulk of the cost results from the clear supply and demand of oil, along with refinement and distribution expenses. Even so, the taxes on gas have not been raised since 1993, which means we’re able to do less with the revenue it generates. It should be at least 15 cents higher. The United States, with its 19 percent, lags far behind other industrialized countries with regard to gasoline taxes, including Italy (64 percent) and the UK and France (each at 63 percent). These are funds desperately needed for the maintenance of roads and bridges that have been identified as needing repair. Taxes on oil and gas should also be increased to support the expansion of public transportation and high-speed rail, especially in the Northeast.
According to the Center for Climate Energy Solutions, the transportation sector amounts for 29 percent of greenhouse gas emissions, the largest single source, which makes sense since Americans are buying more SUVs than ever. If the cost of gas means people are more likely to buy electric or hybrid vehicles or even opt for smaller combustion engine vehicles, then we should consider that a win.
We are already seeing the impact of climate change, which will undoubtedly impact vulnerable and indigenous people first and hardest —that is, the people having the least impact on the planet. The current debate about CAFE standards is based almost entirely on what is politically possible, not what is technologically feasible or environmentally necessary.
Consumers regularly say they’d pay more for products or services that are environmentally friendly, and paying the real price for gasoline is one way to do just that. There also needs to be strong incentives in favor of carbon-negative and carbon-neutral modes of transportation, especially as the pandemic recedes and travel returns to normal or even increases, which is very likely. Fuel-related increases in airfare could also make plane-travel less frequent, one of the best things we can do for the planet.
Although the market sets prices, the price increase could be the best and last hope to get real on climate. Rather than seeking to lower gas prices, the situation might be President Biden’s best shot at putting the fossil fuel industry on notice and adopting anything close to a Green New Deal.
The measures we use matter —in terms of how we frame the debate but also in how we understand the policy options available to us. If nothing else, the talk about gas prices has revealed what is most lacking from many public policy debates: context.
Steven Michels is a professor of political science and Director of the Institute for Public Policy and Civic Engagement at Sacred Heart University.