Let’s give the SUV drivers a break, shall we? I know, it’s more economical and less polluting to buy small econo-cars, but this is America and we do pride ourselves on personal freedoms and a marketplace with a grotesque number of choices in it. Besides, most of the SUV backlash over the last couple of months seems to stem from an ill-founded belief that SUVs are somehow directly related to the dramatic rise in gas prices. I don’t think so. This doesn’t even make rational sense. Has the percentage or number of SUVs on the road changed much in the last year? Certainly not in any significant enough way to have driven gas prices well over $2/gallon.
There are two driving factors for the rise in gas prices. One is the political instability in the Middle East. For obvious reasons, if that place falls to anarchy, radical extremists, or any force that would rather deprive the U.S. of gas than have our money, we are in a world of hurt. And keep in mind that we are the ones that are stirring that pot. We may ultimately foster a more stable and U.S. friendly region in the Middle East, but that writing is far from on the wall. In the short term, we are absolutely the ones who have militarily destabilized the region. So to that end, we (the U.S.) are responsible for sending our own gas prices up.
The other driving factor in rising gas prices is the simple fact that world demand has increased. Note, that’s world demand, not U.S. demand. Increased demand without increased supply equals higher prices. That’s basic economics. But why is demand up? The major new markets for oil are China, India, and Brazil. These are all emerging economies, and let’s not forget that they are all emerging based heavily on U.S. investments. We are sending our business there in an effort (ironically) to keep our prices down. This means that these countries need industrial infrastructure, and that means power for electricity, transportation networks, and manufacturing – and that means oil. Further, by increasing the standard of living of the people in these countries, they can now afford more power consuming devices, including cars (and probably SUVs, but that’s not the point). So in a very direct way, we are driving the economic growth which is increasing the oil demand. That in turn translates directly to higher gas prices for us.
So to recap, we are the major cause of market fears based on potential disruption of supply. We are also the driving cause of industrial growth which is increasing global demand. And we sit here blaming our neighbor’s Hummer?