Just because you are having difficulty paying your bills doesn’t mean you shouldn’t have to pay more for gasoline!

Eduardo Porter is a Bloomberg Opinion columnist covering Latin America, US economic policy and immigration. He is the author of “American Poison: How Racial Hostility Destroyed Our Promise” and “The Price of Everything: Finding Method in the Madness of What Things Cost.” A prolific writer on economic matters, I have, sadly, been unable to find a link to his net worth, but it’s obvious that he’s reasonably well-to-do, with gigs with Bloomberg, The New York Times, and The Washington Post. It’s also obvious that he doesn’t really care about how people earning less than he does live.

The Earth Wants Biden to Keep Gas Prices High

There’s one bold move President Biden could make to curb climate change: Find a way to put a $5-a-gallon floor on gasoline prices.

by Eduardo Porter | Wednesday, July 20, 2022 | 10:10 AM EDT | Updated: July 20, 2022 | 11:34 AM EDT

When President Joe Biden visits the decommissioned coal-fired Brayton Point power plant in Somerset, Massachusetts, on Wednesday afternoon to lay out his planned executive actions on climate, his allies will be looking for bold initiatives. As Oregon’s Senator Jeff Merkley put it to the Washington Post, the impasse in the Senate created by Senator Joe Manchin’s blocking of his environmental agenda “unchains the president from waiting for Congress to act.”

I have, alas! run out of free articles from Bloomberg, but, not to worry, it was also available at The Washington Post, for which I have a $99.00 per year digital basic subscription!

But here’s one bold move that Biden is unlikely to make, despite the real dent it would put in the emission of heat-trapping carbon dioxide that is causing such havoc with the weather: Stop the fall in gasoline prices.As any economist will tell him, the most efficient way to reduce fossil fuel consumption is to raise its price relative to alternatives, encouraging people and businesses to switch to cleaner sources and use less energy altogether.

President Obama’s cap-and-trade proposal for CO2 emissions, which failed to pass the Senate in 2010 (and which then-Senate candidate Manchin also disliked) aimed at a similar target: It put a ceiling on overall carbon pollution and created a market for businesses to trade permits to emit CO2, setting a price which would rise as the number of permits was reduced to zero over time.

Increasing the price of gas is not the same as increasing the price of the CO2 it releases into the atmosphere when burnt, but it’s close enough. The beauty of this moment for the president is that he wouldn’t have to deploy any political capital for this to happen. Russia’s invasion of Ukraine already did the trick — sending the average retail price of gasoline above $5 a gallon in early June. All Biden must do is keep it from falling back.

The climate would thank him.

Perhaps the “climate’ would thank him, but the American people certainly would not.

The latest inflation figures were that prices had increased 9.1% in June, year-over-year, while average hourly wages increased just 5.1%. Inflation is already making Americans poorer in real terms. Gasoline prices have been falling for about a month now, but they are still higher than they were a year ago, and as the price of fuel increases, the price of everything that had to be transported — which is everything — must also increase. The distinguished Mr Porter would like for regular gasoline to be priced higher than I have ever seen it locally, though perhaps not as high as in my previous home state of Pennsylvania.

Cars and trucks account for 22% of US carbon emissions. Gas prices in the $5 range would inevitably trim their contribution. For instance, driving a Ford F-150 at $5 a gallon would set the average driver back by about $281 a month, assuming a fuel economy of 20 miles per gallon over 13,474 miles driven per year. That is about $85 a month more than if gas had stayed at $3.50, where it was in early February, before Vladimir Putin sent troops into Ukraine.

So, Mr Porter wants to charge me roughly $3,372 a year to drive my 2010 Ford F-150. I own my F-150; I am not making payments on it. To replace it with a comparable F-150 plug-in electric Lightning, which I could not buy anyway given that Ford’s website says, “Due to high demand, the current model year is no longer available for retail order. Contact your dealer for more information,” I’d be looking at a manufacturer’s suggested retail price of between $39,974 and a whopping $90,874. I paid less than that for my house!

In reality, Mr Porter is telling us that nobody needs an F-150; he wants us all to drive toy cars or take the subway, but for some of us, a full-sized truck is needed. I am not using my truck to haul groceries and beer, but as a work vehicle around the farm, carrying animal feed, lumber and other supplies that won’t fit in, and would dirty up if they did fit, Mrs Pico’s 34.3 MPG Toyota Camry.

Cutting back on driving is not easy. People must get to work and school. Not everybody can switch to public transit or buy a Tesla. Still, economists at the Dallas Fed have estimated that the price elasticity of gasoline demand in the short run is around negative 0.37. So a 43% price hike, from $3.5 to $5 a gallon, would cut gas consumption by about 16%.

The savings over an entire year would amount to 21.6 billion gallons of gas. Since burning one gallon emits about 8.1 kilograms of CO₂, such a reduction would prevent about 175 million tons of the stuff getting into the air, alongside a bunch of other noxious fumes.

So, let’s do the math. Assuming an average of 20 miles per gallon, 21.6 billion gallons of gasoline would mean 432 billion miles not driven. With roughly 210 million adults under 65 in the United States, that’s 2,050 miles Mr Porter would cut from each and every adult between 18 and 65. Driving is not a wholly elastic demand; some things are very much required: driving to work, to the grocery store, and simple normal life. What Mr Porter would do is cut out Americans’ vacations!

These numbers are rough approximations. Other things happening in the economy can confound the measurement of price elasticities. They change over time. Short-term price increases may have a smaller effect than increases sustained over time, which would encourage the driver of the F-150 to swap into the “Lightning” model that runs on electricity.

Does he mean the “Lightning” model that costs an arm and a leg, and runs on electricity, the cost of which has also increased significantly? In the United States, most electricity is produced by the burning of fossil fuels, primarily natural gas and coal. And the recent higher temperatures caused the Lone Star State to put out a warning, asking Texans to be careful with their sparktricity use, to not overly strain the state’s power grid. The Austin American-Statesman reported, just three months ago, that there were about 121,500 plug-in electric vehicles registered in Texas, or just 0.5% of all 23.68 million vehicles in the state. What if ten percent or twenty percent were plug-in electrics? How would the state’s power grid deal with that?

The answer is, of course, that power-generating capacity would have to be significantly increased, and the power grid upgraded, to handle the increased demand, and all of that would cost Texas electricity consumer — meaning: just about everyone — more money, because increasing power generation capacity and upgrading the grid would cost money, cost a lot of money. Even Mr Porter realized that!

Higher energy prices will eat into consumers’ pocketbooks and slow the economy. What’s important for the president to understand is we have no choice. Fossil fuels must become more expensive. Lacking perfect zero-carbon alternatives that we could switch to cheaply at scale, we must recognize that higher energy prices are an inescapable component of any strategy to mitigate climate change.

However, while recognizing it, Mr Porter doesn’t seem to care. But in an economy in which inflation is rising at a rate roughly 4% per year higher than wages, a lot of other Americans do care about that. Inflation is making everybody relatively poorer, and if Mr Porter, perhaps, has enough wealth and income not to have to worry about that, not everyone is in the same boat. The Federal Reserve Bank of Minneapolis reported that, in 2019, the year before the COVID-19 panic, 37% of the public would have difficulty meeting an unexpected $400 expense, and another 12% wouldn’t be able to pay it at all. Yet Mr Porter wants to add $281 per month, every month, to all Americans driving a 20 MPG vehicle.

I have previously mentioned that with the switch to digital technology, OpEd writers are no longer restricted to 750 words, and Mr Porter used 1,399 to make his case. There’s a lot that I have not quoted, in which Mr Porter tells us that we have no choice in the matter, that this has just got to be done. To be fair, he does state that perhaps $5.00 per gallon isn’t the right price to impose, that perhaps the ‘social cost’ of fighting global warming climate change could be set lower, but that it cannot be zero. But while he recognizes that the President Biden faces a difficult political environment to push these changes, he never seems to get why that political environment is so difficult. It’s difficult because he’s asking most Americans to become poorer, significantly poorer.

Remember Walter Mondale, and his promise to raise taxes if he was elected President in 1984? He carried Washington, DC and one state. When you are struggling to make your mortgage or rent payments — nationwide, rents increased by an average of 15.3% over the last year — and pay for electricity, natural gas, water and food, perhaps you have more immediate concerns than what the climate will be fifty years from now. An actual economist ought to realize that; Mr Porter, an economics writer, just simply does not.