Thursday, April 27, 2006

A Debilitating Bleeding

An interesting phenomenon growing from the oil price explosion is the Pollyanna reaction coming from the Right sampled here. Humorously, they are parroting many of the things we environmentalists have been advocating for decades. The high oil price is all good, they say, because it will stimulate alternative energy sources, conservation, car pooling, and high-mileage hybrid vehicles. I really can't argue with them although I will add that reducing greenhouse gas emissions is another benefit.

The problem is how we are accomplishing these good things. We are experiencing gas rationing by random price hikes. This is the least rational way possible. Well, okay, rationing through gas lines like in the 1970's was even less rational. The impact is unmitigated. The result will be inflation. Businesses have to increase their prices to cover the increased cost of transportation. This will ripple through the economy in a slow debilitating bleeding. The Arab Oil Embargo in 1973 triggered a stagflation recession that lasted for a decade.

Planned high gas prices through tax policy, as in Europe, creates a more stable market and funds extensive mass transportation alternatives to the auto. The absence of any alternatives to the car in the United States will cripple us.

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