Gas is Getting Cheap, and That's Bad

Photo by Markus Spiske

Everyone's getting excited that gas prices are dropping, because everyone knows that's just a good thing, right? Well, sometimes the truth is counter-intuitive and it sounds like that's the case with gas prices right now.

Both Forbes and The Wall Street Journal ran pieces recently that explored the bad economic consequences of gas that's too cheap. You can read those two articles to get the full rationale, because I won't do justice to them in a short space here.

Aside form the macroeconomic ramifications of cheap gasoline, there are some other concerns that are more focused on the areas of the automotive industry. One of the big concerns right now is that with cheap gas, consumers will stop wanting to buy electric cars and other alternative-fuel vehicles. This will cause stagnation in the technological advancements with these platforms, which will be a big deal when gas prices rocket back up, because they will. That's when people will be clamoring for something that doesn't burn gas, and the stagnant technology will still have quite a few kinks in it.

There's also the concern that with cheap gas prices, people are going to rush out and purchase a big, box-on-frame SUV to carry their purchases from Nordstrom's to home. Not thinking that the vehicle will last longer than the low prices, people do stupid things like that, and then panic once gas is $5.50 a gallon in no time flat.

Abandoning the alternative fuel options also certainly won't help as much with pollution. Sure, internal combustion engines are getting cleaner and more efficient, but they still produce pollution that everyone must deal with. An electric car that is charged using renewable energy from solar panels or wind turbines (or other methods) is truly contributing nothing to pollution just by being driven.

So think about these points as you go about buying a car in the coming months and years. The low gas prices will not continue, because if history has taught us one thing, gas prices are extremely volatile.