Minnesota Farmer


The best cure
March 7, 2011, 10:32 pm
Filed under: cars, Politics, science, travel | Tags: , , , , , , , ,

There is an old adage in the commodities markets, that “the best cure for high prices is high prices.”  When prices of a commodity get high enough the market either finds a cheaper product to substitute for it, or consumers just do without, thus rationing demand.

That is what’s happening with gas prices.

There are always a few consumers who will have to use fuel to make deliveries no matter what the price.  When gas, diesel and oil prices get high enough they will pass on the price increases to consumers of whatever is being hauled.  You can expect higher prices for everything because of rising fuel prices.

There are others that had trouble paying for fuel at the old lower prices.  They must immediately find an alternative.  It could be changing to public transport, or riding a bicycle, they will do without.

Those in the middle will either make fewer trips or buy more efficient vehicles so that they don’t have to use as much fuel.  The market will push consumers until they stop using so much fuel before it stops going up.

We in America have become addicted to cheap transportation fuels.  Public policy has favored cars over public transport.  Much of the rest of the world has for many years placed a higher tax on transportation fuels than here in the U.S. so that those who use cars, use more efficient, usually smaller or diesel powered, vehicles.  We in America still drive huge vehicles compared to the rest of the world.

Our world is telling us to change.  Since transportation fuels have been inexpensive here, we have used great quantities to move large vehicles, many times with only one rider.  We are going to have to join the rest of the world and drive smaller, more efficient vehicles.  Those in cities are going to have to use more public transportation, more car pools.  People living in the suburbs are going to be moving closer to work.

Higher fuel prices will hasten the day when alternative fuels are cost efficient.  The market will look for alternatives. Biofuels and other alternatives will now look doable.  Propane, hydrogen and fuel cells now look better economically.

Until we change, fuel prices will remain high.  High priced transportation fuels will reduce our usage.  Our way of life will change.  We have no choice.

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