In Praise of $4 Gas And Construction Delays

It seems that Delaware motorists will have plenty to complain about in the months ahead. Some pundits claim that gasoline will soon cost $4 a gallon and construction will ultimately begin to add a fifth lane to Interstate 95 causing increased traffic delays and gridlock. May I offer a word of advice to everyone, including myself? Stop whining.

Why is that everyone feels it is their God given right to have incredibly cheap energy that grants them endless personal freedom in their transportation? Why do we blame the big oil companies and then whine at the economic forces at work that will ultimately lead to the increased use of alternative fuels? Why is it that we constantly bemoan the traffic on I-95 and then complain even louder when the DOT attempts to enhance and improve the roadway system and correct it? Why do we want wide, well paved roads and then complain when roads are currently disabled to be widened and paved?

We need to stop and examine ourselves. We are being incredibly short sighted and self indulgent. Do you know why gas is $4 a gallon? A primary reason is the fact that there has not been a new refinery built in the United States in over 20 years but the number of automobiles, including the large number of trucks and SUV's, has increased dramatically. Let me breakdown a little a little economics. It's called supply-demand theory. When supply goes down (or remains the same) and demand increases, the price of an item goes up. So, when supply goes down because a refinery is shut down for either routine or emergency repairs, oil production in Nigeria is at risk because of political upheaval and riots, a hurricane knocks out platforms in the Gulf of Mexco or any other number of reasons, the price of gasoline will go up. Add to this all of the increasing demand whether it be from seasonal driving or from less fuel efficient vehicles or perhaps more importantly from the increasing international consumption of fuel and one can understand why gasoline is more expensive. There is also another element to supply-demand theory that I should add. It's called elastic and inelastic demand. If the price of an item goes up one "unit", and demand for that item decreases by more than one "unit" then you have elastic demand. However, if the price of an item goes up one "unit", and demand for that decreases by less than one "unit" then you have inelastic demand. Gasoline is an inelastic item. At what point would you actually change your driving behavior and buy less gasoline? Did you buy less gasoline when it went to $2/gallon? $2.50? $3.50? Most people didn't and aren't but ultimately we will reach a tipping point.

A lot of people think the large oil companies are just out there to fleece Americans. While I do not harbor any illusions of benevolence on the part of large oil companies, if they could have just pushed a button and charged $4 a gallon for gasoline 10 years ago, don't you think they would have? Are they suddenly becoming more malevolent in their character? I doubt that. And if they charged $6 a gallon right now, don't you think you would still pay it? Are they just being generous then? I doubt that too. It all goes back to economics.

But here is the good news. Americans, being the indulgent and entitlement-focused people that we are, are not going to switch to renewable energy out of the sheer force of our magnanimous will. We're going to switch when it becomes more convenient for us, namely more economically convenient, to do so. And as the price of petroleum based fuels increases, alternative fuels have an opportunity to become more and more competitive. The laws of supply and demand will ultimately steer us away from our collective dependence on gasoline, and we have to suck it up in the short term while this process unfolds.

Now to the roads. I remember commenting to a friend a few years ago that I kind of liked to see road construction because it is one of the few places where I can tangibly see my tax dollars at work. We are very fortunate to have the vast road and interstate system that we enjoy in America. It is in need of even more reinforcement and improvement than it is receiving, but we already complain loudly at the improvements that are being made. Are we not willing to make this short term sacrifice for the larger future gains? We are being hypocrites when we curse roads that need repaired and expanded and then curse the repair and expansion of those same roads. I don't want to hear it. Be thankful that the project is being undertaken at all, that the the project is likely being completed as efficiently as possible, and that at some point in the relatively near future you'll be cruising by and cutting off people in a whole new lane.