I’m torn between elation and depression. This morning, gas is $1.92 per gallon. When I bought gas last week, it was $2.13 per gallon, but I can vividly recall a few short weeks ago when gas was $3.94 per gallon.
I am delighted that all of us “working stiffs” can now afford to drive to work (assuming of course we still have jobs); with gas prices this low, maybe we’ll even have enough money to pay our mortgages (unless our homes were foreclosed prior to Fannie’s and Freddie’s attack of Christmas spirit/guilt) and buy a car from one of the Big Three. I hear big SUVs are now bargain priced. Hence, my depression.
As someone who learned to drive in the mid-1970s (yes, I’m that old), I can distinctly remember the pain of waiting in lines at the gas station to pay more than $1 for gas that had been around $0.29 per gallon just before I earned my driver’s license. For those too young to remember this and whose history classes never made it past WWII, the exorbitant (at least by historical standards) prices for a gallon of gas followed the 1973/74 Oil Embargo. In response, we began to drive less (we couldn’t afford the gas). Congress lowered the speed limits on all the highways to 55mph (or as I remember, Congress required states that wanted federal highway funding to lower their speed limits); the Big Three American automakers were forced to begin designing more fuel efficient cars. Instead of powerful and stylish muscle cars, we got Pintos, Vegas, and eventually Chevettes. Those of us fortunate enough to drive the latter referred to them as “little ‘vettes,” but trust me, no one confused them with Corvettes.
By the end of the 1980s, however, we had already forgotten our lessons. Oil dependency is not good for the US, not for our people and certainly not for our economy. Oil dependency is a poor substitute for foreign policy.
Thus my depressed spirit. I hoped that this time we would commit to developing alternative energy sources, sources that are renewable, environmentally safe, and readily available. I hoped that this time we would commit to breaking our dependence on oil—for ourselves, our economy, and our foreign policy.
I will, of course, relish the relatively low cost of filling up my gas tank, but I will also mourn the now minimized imperative to develop alternative energy resources.
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Well, we should definitely have mixed joy about low gas prices...the reason why they are low is because of slackening demand across the country due to the foul shape of the economy overall.
The risk now is DEflation and not inflation. Most people worry about inflation all the time, but deflation is far scarier. Deflation is the drying up of demand, and deflation was the trigger for the Great Depression.
When people literally have no money, demand slackens and prices go down. The problem is that deflation is both triggered by, and fosters declining demand.
In other words, if I'm a business, and I know that prices for raw materials, transportation, and labor will be cheaper a few months from now, I have no incentive to start building now. That means, no money is put in the economy, which drives prices down further (because everyone is desperate to try to get folks to buy something).
As businesses weaken, wages go down, unemployment increases, and there is LESS money in the economy, triggering more deflation.
It's hard to get out of the deflationary spiral. For inflation, you can keep jacking up interest rates. But you can't go below zero. And we've already tried to stimulate the economy multiple times with rebate checks and tax cuts to try to get people to buy things to check deflation.
I'm more worried about the economic implications of the rapidly spiraling gas prices than the environmental ones.
So, be careful what we wish for. While I've certainly been enjoying filling up our debate vans and cars at home with cheaper gas, it is happening for a reason--demand in the overall economy has fallen off a cliff because businesses aren't transporting as many goods, not as many people have a job to drive to work to, and foreign countries aren't buying as much either.
Scary times.
RG
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