Newswise — With tensions in the Persian Gulf and global demand for crude oil sending prices well above $100 a barrel and gasoline prices to historic highs for the months ahead of the summer driving season, President Obama will deliver a speech later today at the University of Florida in Miami designed to counter rising GOP criticism of his administration’s energy policies.
Several Cornell University researchers who work in fields related to the economic, environmental, political and personal impacts of rising gas prices and energy policy are available to comment on this sharpened political debate and the road ahead for the American consumer.
Available experts include:
Antonio Bento is a professor in the Dyson School of Applied Economics and Management, and a member of the Environment and Energy Economics and Sustainable Enterprise team at Cornell’s Atkinson Center for a Sustainable Future. He is an expert on environmental and energy economics. He says:
“As the presidential campaigns proceed, indeed we expect to see some discussion related to increased gasoline prices, however we should first ask a simple question: are current gasoline prices accounting for the external costs associated with gasoline consumption? External costs include the costs of congestion due to excess reliance on the automobile, local and global air pollution, accidents and dependence on foreign oil. Some very basic calculations that account for these external costs when computing the desired price of gasoline suggest that, at least in the U.S. economy, gasoline prices remain substantially low.
“The real concern is a distributional concern, that is if gasoline prices increase there may be groups in the population that are more affected. What my work documents well is, that in response to increases in gasoline taxes, the government can design simple schemes that recycle the revenues from the tax to compensate some of these groups, therefore neutralizing some of the distributional impacts constraint.
“What we are likely to see in the coming weeks is a political debate where candidates and the president will make promises to keep gasoline prices low. Such attempts typically have very short run impacts ¬– simply because it will be impossible to control fluctuations in crude oil markets – and, perhaps even more important, they come with an environmental cost. Lower gasoline prices imply giving up the incentives that higher prices create for households to drive less and move towards cleaner cars.
Note: Professor Bento welcomes interviews in Spanish and Portuguese as well as English.
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Shanjun Li is a professor at the Dyson School of Applied Economics and Management and a member of the Environment and Energy Economics and Sustainable Enterprise team at Cornell’s Atkinson Center. He is an expert on environmental and energy economics. He says:
“While it is important to deal with the distributional concern, I think that attempts to intervene in the gasoline market with the hope of reducing gasoline prices are wrong-headed.
“Instead, we should recognize that gasoline prices are determined largely by the world oil market, which has been seeing increased demand pressure from other countries and sloppy supply responses. Recognizing that high gasoline prices are likely to be persistent in the future as well as negative consequences from gasoline consumption, our focus should be on reducing oil consumption and dependency by, for example: building our public transportation infrastructure to give families, especially those of low-income, more choices; and putting more effort into promoting fuel-efficiency technologies such as hybrid and electric vehicles.”
Note: Professor Li welcomes interviews in Mandarin Chinese as well as English.
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Robert Hockett is a Professor of Law at Cornell University and the author of several books on politics, government regulation and global economics. He says:
“The Republicans seem to have lost all capacity to keep up with events on the ground in their never-ending search for ills they might blame upon the President.
“First there was the claim that he was soft on terrorism and national defense; but the President's drawing the Bush wars to a close and eliminating bin Laden and al Qaeda took that one away. Next there was continued slump in the economy, rooted in Republicans' own obstructionism and financial hostage-taking last summer, which they tried to pin on the President; yet the comparatively few initiatives Mr. Obama was still able to take over their obstructions improved the economy to the point that consumer confidence is back, housing markets are improving and employment is steadily growing. Then the Republicans complained that mandated insurance coverage for contraception violated religious freedom, so the President altered the regulations to ensure that such freedom would not be compromised.
“So what do the Republicans have left? Well, perhaps that the President is ‘soft on Iran?’ Nope, the President's steady tightening of sanctions on Iran, as the Republicans themselves are of course happy to see, have rendered that regime sufficiently desperate as to take oil off of global markets and threaten war across the Middle East.
“So what do the Republicans have left to blame on the President? Ah, yes! They'll blame the consequent rises in Middle East oil prices on him. It's apparently either that or cancer, which they'll doubtless accuse him next of having invented.”
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Ricardo Daziano is a professor of civil and environmental engineering and a member of the Environment and Energy Economics and Sustainable Enterprise team at Cornell’s Atkinson Center. He is an expert on the relationship between consumer behavior and transportation innovations, and the public’s willingness to pay for alternative energy sources. He says:
“The transportation, energy and economic systems are closely related: Transportation is movement, movement requires energy and the use of energy has a price. Transportation is the single largest consumer of energy, and oil is the dominant energy source, with a share of about 95 percent, which is roughly 70 percent of the total oil demand.
“As a result, a shock in the price of oil provokes several effects, including a higher cost of living due to increased transportation costs of goods, as well as a higher cost of driving. In the last couple of years the total amount of miles driven has in fact gone down as consumers respond to fluctuating and rising fuel prices. In 2011, Americans drove about 36 billion miles less than in 2010.
“One positive side effect is that consumers are motivated to adopt alternative fuels and energy-efficient behavior, such as heating their homes with sustainable energy sources or making their next car a hybrid-electric vehicle. In the end, as more people are encouraged to use sustainable options, such as riding public transportation, rising fuel prices have the potential to dislodge us from our car-dependent habits.”
Note: Professor Daziano welcomes interviews in Spanish, French and Italian as well as English.
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Michael Manville is a professor of city and regional planning and a member of the Environment and Energy Economics and Sustainable Enterprise team at Cornell’s Atkinson Center. He is an expert on the relationship between transportation, land use and local public finances. He says:
“There are two issues here - what the President can do and what he should do.
“The President has the most direct control over gasoline taxes. Roughly speaking, about 12 percent of the cost of a gallon of gasoline comes from taxes. About three-quarters comes from the worldwide price of crude oil. The remainder is refining and so on. So the President has the most political influence over the factor that has a rather small economic influence. And when you consider that a portion of the tax burden comes from states rather than the federal government, and that Congress, not the President, actually sets the tax rate, the President's options are rather limited. The President could always place price controls on gasoline, like President Nixon did in the 1970s, but almost everyone agrees that was a disaster.
“As to what the President should do: people notice gas prices, so they are always a salient political issue, and with many Americans struggling to make ends meet rising prices seem like insult piled on injury. So it will be tempting to declare war on high gas prices. But burning gasoline also causes a lot of environmental problems, both in the form of immediate pollutants like ozone and particulate matter and in pollutants with long-term repercussions like carbon emissions. Most economists agree that if you account for the environmental costs of driving, the price of gas is too low, not too high. And it's worth keeping things in some historical perspective: the average price of gas last week nationally was about $3.50. Adjusted for inflation, that's about what it was in 1982.
“It would be best to let gas prices rise, and find ways to simply get more money into the pockets of all Americans. That way you don't subsidize an activity that has negative environmental consequences, and you also don't bias government assistance toward people who drive. Driving and gasoline consumption rises with income, so reducing gas prices helps higher income people who drive more, while offering no help at all to lower-income people who don't own cars. Yet it is the latter group that struggles most.
“Candidate Obama rejected a gas tax holiday back when the economy was getting rocky in the summer of 2008; that was a sensible position then and it remains sensible now.”
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