CNBC often is there to act as a cheerleader for Wall Street but they also have their moments where they provide valuable information. This time, they're on the money with this problem that nobody in Washington is talking about which is the negative impact of high gas prices on the US economy. It seems as though every time the price hits a really ridiculous number, there is plenty of talk about doing things differently but in the end it's always just talk. The Democrats have made some attempts to address the issue with demanding higher fuel efficiency from the auto makers and promoting high speed rail, which is all great. Unfortunately the Republicans are so closely tied to Big Oil, they view any change as a threat so they fight it. More times than not the GOP is more forceful than the Democrats so they end up delaying programs if not defeating them. When I visit the US from abroad, I'm still surprised at the number of enormous cars and the general waste of energy that I see in the US. Compared to the much higher cost of energy in Europe, it's not possible to be so casual with energy and it's not possible to have as many inefficient cars on the road. Plenty exist, as I discovered, but there are many more efficient cars on the road compared to the US. A few years back, before gas prices really went up, I borrowed a car (in France) for vacation and it cost €130 to fill the tank. Needless to say, that was the last time I borrowed that car. The Dutch transformed their country from a "normal" car based society following WWII to the best cycling country in the world. It didn't happen overnight, but was the end result of issues including the gas crisis of the 1970's. Most people still drive cars, but they also do a lot of commuting using bikes which is both energy efficient as well as healthy for the population. Something needs to change with our energy policy and ignoring the problem is not the answer. How can we afford not to change? there are no easy or quick answers which probably doesn't help in terms of building a consensus. Look back at how painful the health care debate was or the Wall Street reform. There are a lot of moving pieces and a number of fronts to open up to build a holistic plan that will succeed. Kicking the problem to the next crisis is no plan. CNBC:
According to economist Nigel Gault, every $10 increase in the price of a barrel of oil raises gas prices by about 25 cents. The average American home buys about 1,000 gallons of gasoline every year, so every quarter increase in gas takes about $250 per year from your pocket. Multiply that by more than 110 million households and Gault estimates that steals about 0.2 percent from U.S. GDP. That may not seem like much, but 0.2 percent of our $15 trillion dollar economy is about $30 billion dollars per year. These are big numbers that grow if gas prices go higher. And remember, salaries have been stagnant. Using Gault’s assumptions, if gas prices rise by $1 per gallon, it would steal about 0.8 percent from economic growth, or more than $100 billion per year. Now consider all of the debate about tax cuts on the rich. One group estimates that the economic cost to the country of those tax cuts on the top 5 percent of wage earners has been about $1 trillion, or $100 billion per year, since they were enacted in 2001.