High oil prices are a good thing!

Houston Smartypants Car
Creative Commons License photo credit: Lori Greig

I wrote a post a couple of weeks back saying that the sooner oil reaches $200 per barrel, the better. Unsurprisingly, it generated a bit of comment!

So I was mighty chuffed to read Thomas Friedman’s superb Op-Ed in the New York Times yesterday where he made a very similar argument.

Thomas said:

there is no short-term fix for gasoline prices. Prices are what they are as a result of rising global oil demand from India, China and a rapidly growing Middle East on top of our own increasing consumption, a shortage of “sweet” crude that is used for the diesel fuel that Europe is highly dependent upon and our own neglect of effective energy policy for 30 years.

Cynical ideas, like the McCain-Clinton summertime gas-tax holiday, would only make the problem worse, and reckless initiatives like the Chrysler-Dodge-Jeep offer to subsidize gasoline for three years for people who buy its gas guzzlers are the moral equivalent of tobacco companies offering discounted cigarettes to teenagers.

I like the discounted cigarettes to teenagers analogy but it doesn’t go far enough. You give discounted cigarettes to teenagers, you kill them. You give discounted petrol/gas and you kill the planet. In effect, with its massive subsidies for oil companies (subsidies for oil companies? who thought that was a good idea?), this is what the United States administration has been doing for decades. But we digress.

He goes on to quote the arguments of energy economist Philip Verleger Jr. who wants a “price floor” – a guaranteed minimum price below which gas will not go:

$4 a gallon for regular unleaded, which is still half the going rate in Europe today. Washington would declare that it would never let the price fall below that level. If it does, it would increase the federal gasoline tax on a monthly basis to make up the difference between the pump price and the market price.

To ease the burden on the less well-off, “anyone earning under $80,000 a year would be compensated with a reduction in the payroll taxes,” said Verleger. Or, he suggested, the government could use the gasoline tax to buy back gas guzzlers from the public and “crush them.”

But the message going forward to every car buyer and carmaker would be this: The price of gasoline is never going back down. Therefore, if you buy a big gas guzzler today, you are locking yourself into perpetually high gasoline bills. You are buying a pig that will eat you out of house and home. At the same time, if you, a manufacturer, continue building fleets of nonhybrid gas guzzlers, you are condemning yourself, your employees and shareholders to oblivion.

With the current high prices for gas/petrol in Europe and the US, the message is starting to get through. Te demand for hybrid cars is growing daily as Thomas noted when he went to buy a new one:

I was visiting my local Toyota dealer in Bethesda, Md., last week to trade in one hybrid car for another. There is now a two-month wait to buy a Prius, which gets close to 50 miles per gallon. The dealer told me I was lucky. My hybrid was going up in value every day, so I didn’t have to worry about waiting a while for my new car. But if it were not a hybrid, he said, he would deduct each day $200 from the trade-in price for every $1-a-barrel increase in the OPEC price of crude oil. When I saw the rows and rows of unsold S.U.V.’s parked in his lot, I understood why.

The absolute worst thing which could happen now would be for oil prices to drop again. Companies who had invested heavily in renewables would potentially go out of business and fuel efficiency would no longer be a primary concern for car buyers.

No, high oil prices are a good thing. Nothing will move us off the carbon economy as effectively as a strong financial incentive.


  1. says

    High pump prices are a frequent reminder, better than government leaflets and websites.

    OT: I’d be interested to see a post from GreenMonk on hybrids like the Prius vs. efficient diesel cars like the BMW Mini with Efficient Dynamics. Is mpg and emissions all there is to measure or is the hybrid better even with worse mpg? (BMW Mini diesels with ED apparently get 60mpg.)

  2. says

    Hi Tom,

    Great post, and I agree with most of what you say. High oil prices are indeed fuelling (pardon the pun) the move towards more sustainable alternatives. It’s a shame things have to hit people in the pocket before they take any action… but there you go.

    The one point I would like to make is this — whenever people debate climate change (I refuse to call it global warming, especially looking out of the window in West Cork today) and the impact we’re having on the earth they tend to talk about saving/killing the planet. That’s not what’s happening here… the planet will carry on regardless.

    What we’re really talking about is saving/killing humanity. Long after we’re gone the planet will simply dust itself off and get on with things. It might seem like nit picking, but is, I believe, an important distinction.

  3. says

    @Paul, I’m interested in looking into that myself as I am in the market for a new car shortly. Will post on this soon.

    @Calvin, I get your point but I respectfully disagree! We are currently in the middle of a mass extinction known as the Holocene Extinction. From the wikipedia entry for same (

    Most biologists believe that we are at this moment at the beginning of a tremendously accelerated anthropogenic mass extinction. E.O. Wilson of Harvard, in The Future of Life (2002), estimates that at current rates of human disruption of the biosphere, one-half of all species of life will be extinct in 100 years.

    While I understand that the planet itself is not alive, per se and therefore can’t be killed. If we kill 50% of the species on the planet in the next 100 years I don’t think it is hyperbolic to use language like killing the planet.

  4. says

    I understand your point about mass extinctions, and that our appallingly wasteful exploitation of the planet’s natural resources is contributing to the dramatic accelaration of the current one.

    I’m under no illusion that, when/if we go, we’re going to take (are in the process of taking) a lot of other species with us — which is deplorable; but the biosphere will in all probability endure, regenrate and recover regardless of the mess we leave behind. It might take a while, but ultimately it will.

    I’ve always believed that humanity harbours an inflated perception of our own significance. We believe that if we cease to be, so does the planet, when in reality we’re merely a blip in geological time. Okay, we’re a blip that punches above its weight in terms of impact… but a blip nonetheless.

    Through our plundering we’ve created an ecological imbalance in the earth’s systems, the planet’s natural buffers are all but exhausted, and one way or another Nature will redress the balance. The choice we’re making right now is whether we’ll work with nature to help her obtain that balance, or persist with our brief and ultimately unsustainable tenure on earth until we perish.

    A simplistic summary, perhaps… but that’s pretty much what it boils down to. I’m for the first option, by the way :).

    Of course if the phrase “killing the planet” or “saving the planet” helps as a persuasive argument to get the masses off their butts to engage with the issue, then I’m all for it… but based on current evidence I’m not convinced that it’s working.

    Personally I think that switching the focus from survival of the planet to survival of humanity makes for a more compelling argument. We’re fundamentally selfish beings (which is why we’re in this mess to begin with)… and it brings the issue closer to home… don’t you think?

    Right… enough. This is longer than I anticipated. Should have turned it into a blog post instead. Thanks for the opportunity to engage my brain in something other than writing about digital marketing for a while! 🙂

    Oh well, fun’s over, back to work!

  5. Dan Barnes says

    I’ve had an ax to grind for 25 years and am glad that oil prices are high. I wish they would top $200.00 and stay that way for a LONG time. I worked for an energy research company out of college for 5 years back in the late 1970’s which was gutted when cheap oil became available. I KNOW great advances in fuel cell technology were made back then. It was my job to graph performance and life expectancy of various fuel cell types.
    Americans collectively “think” with the reptilian portion of their brains based on fear,hunger,etc. I doubt if men would have landed on the Moon without the Soviet Union seen as a threat.
    I only feel sorry for the low income people in all of this. I do have a bit of “schadenfreude” when those with McMansions are despately trying to dump their SUV’s. It really IS worth paying more to fill my Toyota Corolla to enjoy to these dumb-asses whine.
    I’ve hesitated to jump on the wagon with global warming concerns since I’m afraid the poor will be screwed in all of this, Al Gore lost his home state because coal workers thought they’d be out of a job if he was elected. High oil prices are doing what all the talk can’t do though, even if the poor are going to get screwed anyway.
    Winston Churchill said it all “America always does the right thing, eventually.”

  6. Nancy says

    To Dan Barnes:

    You sure are a self-righteous know-it- all. Get off your high horse and join the rest of us down here on the ground.