Why High Gas Prices can be Good for the Environment

With the recent dropping of crude oil prices to below $120 a barrel, there are sighs of relief on both sides of the aisle. But is that a good thing if you’re perhaps a bit more environmental-leaning?

Recently, Canadian investment bank BMO Nesbitt Burns’ deputy chief economist has suggested that high gas prices are making a difference in commuting behaviour. According to a note from Statistics Canada, service station receipts went up by 2.4% in May, while gasoline prices grew more than 3 times that: 8.8%. This suggests pretty strongly that high gas prices have induced commuters to change their driving behaviours. People are starting to leave their cars at home and taking public transit, working compressed workweeks or just carpooling. Anything that might allow them to save on fuel costs.

While high gas prices are not the most effective way to combat environmentally degrading driving patterns – unless you grow all your own food, chances are likely that high gas prices are going to translate into higher food costs – high gas prices are starting to encourage the sorts of commuter behaviours that environmentalists have been attempting to mainstream for years.

In an effort to combat this, carmakers are retooling their business lines to encourage consumers to carry on buying and using cars. Ford is expected to announce this week that they are in the process of converting three of their truck plants into auto plants, and that they will begin manufacturing their more fuel efficient European models for the North American market. Thanks to high gas prices, the market for large and mid-size SUVs has virtually collapsed, leading to some of the worst annual vehicle sales for the auto industry in over a decade.

There seems to be a real policy driver lesson to be learned here: behaviour incentive change seems to work best through the wallet, not through altruism. The real question I ask you, dear readers, is whether or not these changes are temporary or permanent. Once (if) gas prices start to decrease, are we going to witness a return to the behaviour that brought about these high prices in the first place?

For More Posts on Gas Prices and the Environment:

• Why Gas Prices are Keeping People at Home
• Gas Prices and Public Transportation
• Will High Gas Prices Kill Suburban Sprawl?

Image source: Lover of Romance at Media Commons

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