Rising Gas Prices Are Good for Moldmakers and America in the Long Run

As I write this, the price of gasoline is rapidly approaching four dollars a gallon, and some analysts predict that it will go even higher as Memorial Day draws near. Right on cue, there have come news reports suggesting that rampant speculation is the reason for these surging prices, and many of these same reports suggest that the Obama Administration should sell some of the oil that is stored as part of the nation’s Strategic Reserves in an effort to thwart the speculators and force oil prices lower.

I do not think that the President is seriously considering such a move. But just in case he is, or just in case there are some misguided souls out there who think that he should sell some oil, let me state emphatically, and for the record, that this is a really bad idea. First, the Strategic Reserves are for an emergency. Rising gas prices will wrankle a lot of folks, but this is not a national emergency. Or if it is, then we are in a lot worse shape than I think we are. Second, it will not work. At current levels of consumption, there are only about thirty days worth of oil stored in the reserve program, and this is not enough to scare the market into selling. In fact, it would probably push prices higher because it could be interpreted as an act of desperation or fear.

And third, speculators are not the real reason that gas prices are in a long-term up trend. The real reason is that Americans do not want to end their addiction to cheap gasoline. You would think that we would have learned our lesson by now, but we have not. And until we do, the price of gas will continue to rise. In other words, the price of gas will go up until consumers decide that they no longer want it.

So instead of complaining, let’s take this opportunity to learn, to grow, and to become stronger as a nation. High gas prices may cause some short-term pain, but ultimately there will be long-term gain. Here’s why. As fuel prices rise, it will provide the necessary incentives for new types of energy-efficient equipment to be designed and manufactured. There are already reports of car manufacturers starting to design cars with structural parts that are made from plastic rather than steel. These new parts will require new machines and new tooling in order to product them.

A second benefit of higher fuel costs is that the long supply chain to China will become too expensive to maintain. It will no longer be cost-effective to ship plastic products by boat from China to the West Coast and then load them on a truck for distribution all over North America. In order to be viable, many products will have to be manufactured much closer to where they are consumed. Many other types of imported products will simply become obsolete or unwanted by the market.

The ultimate result of all of this is that the U.S. will stop needing so much oil, so we will stop sending so much of our nation’s wealth to despotic rulers in the Middle East. The greatest transfer of wealth in the history of man will finally come to an end, and at the same time it will dry up most of the funding for terrorist organizations that are trying to do us harm. There will also be some environmental benefits that accrue as we stop generating so much air pollution and no longer run such high risks for oil spills. Breaking an addiction can be a painful process, but if high gas prices are the cure, then I say bring ‘em on. The sooner we get over this destructive relationship with OPEC the better.