Uncommon Indicator: Gas at $3 Per Gallon


At first blush, the imminent rise of gasoline prices to about $3 per gallon is not such great news. Who, after all, can afford to spend considerably more on anything these days, let alone on something many of us use almost every day?

But a longer view suggests that rising gas prices signals rising demand, which means that more folks have more places to drive and require more fuel to get there (hopefully the places they are driving are jobs and not pawn shops.)

What should be worrisome, some believe, is when the cost of gas drops suddenly in the other direction, as it did soon after Lehman Brothers and the housing market bit it, taking consumer demand down with them. And besides, gas is often more expensive in the warmer months as hibernating humans thaw out and hit the road in search of hot thrills. So long as the price doesn’t budge much above three bucks and the spike only lasts a short time, economists think that would constitute a temporary cost of living increase, not a derailment of our fragile recovery. (Although anything that costs $1 billion a day must put a hurt on the collective wallet, no?)

Finally, the summer surge in gas prices can only be helpful in terms of lighting a new (clean burning) fire under our efforts to develop sustainable, alternative fuel sources. It might also get more commuters to share rides or opt for public transportation. And that’s not a bad thing, either.


Image: / CC BY 2.0MM