Almost every economist will tell you that the best way to manage demand is through price. With low prices, we use more of something. With high prices, we use less. If fresh fish (and the skills of a chef) were dirt cheap, I’d be out having sushi every chance I could. But I’m not. And it’s all because of price. Goodbye toro; hello chicken.
Apply that same line of thinking to gas prices. When the price per gallon goes up, our behavior changes. We drive less. We consider getting more efficient — or even electric — cars. We carpool. We take subways and buses. We work from home if we can. We ride bikes. Heaven forbid, we might even walk.
Anything to save a buck.
This isn’t just theory. A think tank at San José State University in 2014, for example, observed that demand for light rail transit climbed 9.34 percent when the price per gallon exceeded $4. More than a decade ago, the Federal Highway Administration noted that in the first 10 months of 2008, Americans reduced their driving by 3.5 percent — 90 billion miles! — as prices at the pump rose above $4. (Yes, really. For all of our complaints now about $4-plus gas, it’s not a new problem.) And a March 2022 survey by the American Automobile Association found things hadn’t changed much: at $4 per gallon, 59 percent of respondents said they would “make changes to their driving habits or lifestyle.” If gas were to hit $5 nationally, as it already has in some places, the number rises to 75 percent.
And when prices drop? Logically, all of that happens in reverse. We drive more, buy bigger cars, and no longer cram into public transit. And we make fun of those silly people on bikes.
So here’s my big question: If climate change is such an extreme catastrophe — one that the United Nations says will continue to render portions of the world “uninhabitable” — and if burning fuel is a major contributor to this, why are politicians (including, and sometimes most loudly, the left wing) trying so hard to make the price of gasoline go down?
Isn’t that exactly the opposite of what we should be doing?
Seems like it. But Democratic governors from states including California, Colorado, Connecticut, Michigan, Pennsylvania, and Wisconsin want to suspend the federal (and in some cases, the state) gas tax to make fuel cheaper. For his part, President Joe Biden is doing the same by tapping 30 billion barrels from the Strategic Petroleum Reserve. This is the same guy who, in one of his first executive orders, vowed to place climate change at the “forefront of this Nation’s foreign policy and national security planning.”
At the forefront, I guess, unless that means paying $4 a gallon.
All of which suggests that, while our rhetoric about the global climate crisis may sound uncompromising, our will to solve it is not. That, in part, is politics: The complaints of aggrieved motorists are far louder than the cries of the planet.
But it reflects a deeper divide as well. The broad stereotype is that the Democrats believe in regulation, the GOP in the free market. Academics and think tanks argue that market-based strategies — higher prices, carbon trading, and the like — are the most effective and efficient way to reduce CO2 emissions. But many of the folks who might agree with that approach — Republicans — have taken the head-in-the-sand position that there is no climate crisis to begin with. Meanwhile, Democrats typically shun market approaches in favor of tougher regulation.
Regulation sounds good because it beats up on corporations — Democrats’ favorite whipping boys — while seemingly leaving regular voters unscathed. But it’s heavy-handed, potentially filled with loopholes, and often not that effective.
Consider, for example, federal fuel efficiency standards. By 2026, new cars must get 49 miles per gallon. The Department of Transportation brags the new rules “will reduce fuel use by more than 200 billion gallons through 2050.” Sounds great. But as the think tank Resources for the Future has observed, cheaper gas prices undermine fuel-efficiency standards. For instance, standards were tightened for cars built between 2012 and 2025. But as gas prices plummeted in 2015, the perverse result was that folks bought more gas guzzlers and the average vehicle fuel economy of cars actually declined. Price, it seems, can be a more powerful driver of behavior than regulation.
What was true then will undoubtedly be true this time around as well. Moreover, if the political winds blow differently — say, a Republican president in the White House in 2024 — those fuel-efficiency rules could be readily dismantled.
Of course, as prices rise, we’re all unhappy. And less well-off people are particularly hard-hit. To a degree, that speaks to problems that could be solved with more direct solutions (higher wages and child care credits, for example), rather than simply driving down the price of gas for all. Or perhaps, for sudden price increases, just give low-income families some extra cash, to use as they wish. That might offset the pain in the wallet but — because it’s cash — wouldn’t simply act as a gas subsidy.
Bottom line: Except for a few of the most green-enlightened (and I’m not one of them), most of us are economic creatures. Make gas cheap, we’ll use more. Make it costly, we’ll use less. Politicians should stop trying to manipulate prices and let markets work.
Tom Keane is a regular contributor to the Globe Magazine. Send comments to firstname.lastname@example.org.