Low Gasoline Prices! Now What?

With gasoline prices at their lowest in years, odds are that we will soon be seeing reports about gas guzzler sales on the rise, people traveling more, and maybe even a comeback of the Hummer. Such short-sighted responses might reflect human nature, but they are not conservative. Edmund Burke, widely regarded as the father of modern conservatism, considered¬† prudence the key virtue in both personal and political decision-making. Given the historic volatility of gasoline prices, decisions that assume low prices going forward are certainly not prudent. Gas prices are lower, in part, because greater automobile fuel efficiency and driving habits are helping hold down demand. Reducing demand keeps downward pressure on pricing. If efficiency goes down and demand goes up, prices will respond in the opposite direction. The other reason gas prices are lower is increased supply. This is due to oil production coming from Bakken shale in North Dakota and the recent decision by OPEC to keep supply up. Producing oil from Bakken shale is more expensive than producing oil from the Middle East fields, and OPEC is trying to drive down prices to the point that Bakken production is no longer profitable. If OPEC’s gambit is successful, prices will go up due to decreased U.S. production. If it fails, OPEC will eventually have to cut production to bring prices back up. Either way, low prices are not here to stay. Furthermore, oil is a finite resource. We have already tapped much of world’s easily accessible and cheap to produce oil.¬† Occasional price dips are the exception, not the rule. The prudent, and therefore conservative, response to low...