Thursday, June 05, 2008

The Road Less Traveled

The rising price of gasoline has made my commute to and from work much faster and much safer. “Faster” because there are fewer cars on the freeway during drive time hours and “safer” because traffic is moving at a steady pace instead of too slow or too fast.

For me, the higher price of gas is worth the time I am saving driving back and forth to work. I am getting better gas mileage and I am enjoying my commute more.

At some point, the gas market will adjust. Fewer drivers using gas or the same drivers using less gas is lowering the demand and higher profit for gas producers is increasing the supply. Additionally, employers will have to find ways to compensate employees for their higher cost of living caused by higher gas prices.

There will come a time when the freeways are congested again and the risk of accidents will increase again. For now, I will enjoy the high gas prices while it lasts.


Rick and Gary said...

Hey David -- Higher gas prices are great in a lot of ways, especially the innovations in alternative energies.

But wouldn't it have been great if the high gas prices had come as a result of higher gas taxes. Then the money could have gone to paying down national debt or reducing income taxes, rather than going down totalitarian rat holes in Saudi Arabia, Russia, Venezuela, etc. years

David M. Smith said...

Hi Rick,

How have you been? I see you still can’t ask a question that can be answered in a sentence or two. : - )

Long term, the economy needs inexpensive forms of energy, from oil, coal, fusion, or alternative sources. Batteries are great for storing energy, but not creating energy. The economy will function regardless of the price of energy, but it will function better if energy is just a small input into production.

I don’t mind paying a tax for gas, but I think the tax should only be used to build and improve or widen roads.

I prefer that our government borrow what it needs to spend than for it to tax what it needs to spend. Of course it would be best if government quit spending so much, but I have no hope government spending will ever go down, so by allowing citizens to keep more of their own money, we have some freedom left. Once government starts making us pay for every program created by government, we will have no freedom left.

Rick and Gary said...

Hi David -- I doing really well, thanks. Yours is an interesting perspective. Perhaps deficit financing restrains spending. I can see good arguments on both sides.

But deficit financing does, ultimately, constitute a tax that is hidden in currency devaluation, inflation (including oil, which must be paid in cheapened dollars) and high interest rates, as well as investment and innovation that's delayed or happens somewhere else.

In theory, it seems that people would be more upset about runaway spending if they had to pay for it in a way they could see and understand.

David M. Smith said...

Hi Again Rick,

I’m glad you are well.

I don’t know if deficit spending restrains spending. It seems like it should, but it doesn’t seem like it has.

My point is a little more sinister, I must admit. While I feel a heavy burden to meet all of my personal commitments, I don’t feel the same way about the commitments my government makes on my behalf. If my government can vote to spend money, either through taxes or borrowing, my government can just as easily vote to cancel debts. I think this is considered a bird in the hand beats two in the bush. Perhaps taxes will have to be raised at some point, but we don’t know for sure and we don’t know at what point.

I agree with you that deficit spending does increase the money supply and will cause inflation, but I don’t know for sure that inflation is worse than the government taking yours and my money up front. I mostly care about freedom and I will always choose the choice that allows or creates the most freedom. At this point, government borrowing allows for more freedom than government taxation.

Kevin said...

David wrote: "For me, the higher price of gas is worth the time I am saving driving back and forth to work."

I've heard that argument for keeping tollways from becoming freeways, but I haven't heard it regarding high gas prices. Where have the absent cars gone? Are people car-pooling more? More public transportation? Or were they just rush hour joy riders? :)

Rick wrote: "But wouldn't it have been great if the high gas prices had come as a result of higher gas taxes"

If we were required to choose between those two, I guess a gas tax would be preferable for the reason you mention, but it strikes me as a funny question because they don't really seem to be alternatives as much as, say, allowing more drilling.


David M. Smith said...

Hi Kevin,

How are you doing?

I hate stopping to pay a toll on the highway; I would prefer to pay for the road I am using with gas taxes. I have also wondered where the cars went. I suspect there is a certain amount of discretionary driving that is going un-driven with the higher gas prices. I also suspect there is a certain amount of cars the highways can handle without causing congestion, but it only takes a small percentage above that number to create the slow traffic and back-ups. Possibly some commuters are car-pooling, working from home, or taking public transportation, but for me, all but working from home is more trouble than paying the higher cost of gas.

I have been reading about how China and the most of the oil producing countries subsidize the use of oil as energy which is one of the reasons demand is so high. China is considering reducing and removing the subsidies which will also help gas find the right price based on demand.

Kevin said...

Hi David,

I'm doing well, thanks. How are you? I guess it has been a while.

So your state doesn't have I-Pass or similar yet? I-Pass is like an RFID tag that reflects your ID when you pass the tolls. No slowing down, everything is electronic.

It is very nice and makes it easier for them to increase the tolls without people much noticing. I suspect that they might also use it for tracking speeders at some point.

I didn't realize that China subsidized oil that much. Fascinating. I do hope we are nearing a substantial turning point. Sorry it'll cause you problems. :) Hopefully we will find better solutions to road congestion.


David M. Smith said...

Hi Kevin,

I am doing well. My fire for writing has gone out a little bit and my job has kept me busy.

Southern California has a few highways with toll lanes that use the RFID tags. Commuters have the option of whether or not they want to pay the toll for the lanes that should move a little faster.

I agree with you; high gas prices is not the best solution to congestion. We need better roads, wider roads, and more people doing their work from home.

Oil is plentiful when countries and companies make the commitment to get it out of the ground or beneath the sea. Gas is cheap when countries and companies make the commitment to refine the oil. My guess is we are close to the turning point, but our government may find a way to screw things up by enacting a bad solution.

Rick and Gary said...

Hey guys -- I totally agree on the drilling. As George Will said, "One million barrels is what might today be flowing from ANWR if in 1995 President Bill Clinton had not vetoed legislation to permit drilling there. One million barrels produce 27 million gallons of gasoline and diesel fuel. Seventy-two of today's senators -- including Schumer, of course, and 38 other Democrats, including Barack Obama, and 33 Republicans, including John McCain -- have voted to keep ANWR's estimated 10.4 billion barrels of oil off the market."

With regard to gas taxes vs. RFID tolls for congestion, I'd vote for RFID tolls. There's pricing flexibility.

David M. Smith said...

Hi Rick,

Sounds like you want our government to stick their hands in both of our pockets. : - )

Someday we will get to pay the IRS a tax submission fee.