Getting Beyond The Politics Of Gas Prices

Our survey asked people what they considered a "reasonable" price for gasoline and what they considered "unreasonable." This graph shows the perils of trying to find the "right" gas price. An economist would want to choose the price that is painful enough to influence people's choices. In our survey that could be $3.00-$3.50 a gallon, which is equally loved and hated by respondents, or higher. But a politician would find that price totally unacceptable because so many people would object to it, and would want a lower, more agreeable price, which would not hurt. The graph demonstrates how incompatible these urges are.

Some political leaders have tried to answer the public's anger over gas prices by calling for supply improvements: More domestic oil drilling, imports from Canada, and subsidizing ethanol and biofuels. The problem with these strategies is that the price of gasoline is created in the international market, and while these domestic interventions could reduce the contribution of gasoline spending to the trade deficit, they will not reduce the overall price tag of US gasoline spending. Even if it were possible to significantly increase US oil production, US oil refiners are increasingly players in the international markets. Recently they have been exporting significant amounts of gasoline, which has kept domestic pump prices high, even though the US was over-supplied with gasoline. In any case, supply side proposals are not making voters feel secure. Fully 98.7 percent of our respondents answered "no" when asked if their elected representatives had already made policies to help reduce household costs for transportation.

The only sure way to reduce the toll of gasoline prices on our economy, and defuse them politically, is to focus on bringing down gasoline demand by giving consumers choices. There's still a lot of work to be done to more thoroughly understand the connections between income, price, and gasoline demand, but there's much that can be done to give consumers the keys to free themselves from the helplessness of the energy trap. Policies that bring down the total cost of transportation and enable middle class families to feel empowered when prices rise could be winners both economically and politically.

In the long run, changing development patterns, introducing new technologies for both fuels and autos, carbon pricing, and policies to make highways self-sustaining will reduce the energy intensity of our infrastructure. But in the shorter term, policy makers should consider two ways to hand voters the keys:

First: Aim programs to reduce transit costs at the middle class. Though there's long been an impression that Americans do not want to change their habits, the relatively high numbers of people who say they've dramatically changed household spending to be able to afford gas suggest that some people are primed to make adjustments. Offering struggling households options like access to more convenient, cheaper transportation; policies that get employers involved in the task of reducing the burden of transportation; or helping middle class households purchase more efficient vehicles could yield big dividends by decreasing oil dependence and increasing household financial stability.

Second: Target geographic areas with very high costs. Some states have far higher transportation burdens than others, and parts of some metropolitan areas have exceptionally high transportation costs. Targeting geographic areas with locally appropriate programs that increase transit options --possibly by offering incentives to entrepreneurs, employers, and riders--could help families save money and enable them to spend their savings in their communities. (For several programs that are working now, see the EnergyTrap.org.)

Finally, the media and political leaders should listen more closely to drivers about the impact of gas prices on their lives. Recognizing the pressures that drivers feel from gas costs, auto costs, and the state of the economy in general requires reframing the discussion from empty slogans about lowering gas prices towards finding pragmatic ways to lower real costs. Giving voters the tools to free themselves from the energy trap requires changing the language of the discussion of gas prices away from anger, conspiracy, and helplessness and towards conscious choices and the possibility of a better life.