The downside of cheap gas

December 11, 2008 7:55:40 PM PST
Gas prices have plummeted in recent weeks as dramatically as they climbed over the summer. Drivers are relieved, but is there a downside to the relief at the pumps? Maybe so.

When gas prices approached $5 a gallon, people got out of their cars, big car sales plummeted -- environmentalists rejoiced.

Alternative vehicle start-ups saw funding coming their way, existing alternative car companies said, 'I told you so' and that propelled Congress to force Detroit to wake up and smell the bio-fuel.

"We learned a lesson with those high costs of fuel and if we forget that and go back to our old ways, then we're making a huge mistake," said Rep. Lynn Woolsey (D) Petaluma.

But history shows Americans do forget.

"The idea that they somehow change permanently and people learn their lesson when the price goes up is really not supported in the data," said U.C. Berkeley professor Severin Borenstein, Ph.D.

Borestein is Director of the University of California Energy Institute and a professor of business administration.

"People drive less when the price goes up and buy more fuel efficient cars, and when the price goes down they drive more and they buy less fuel efficient cars," said Borenstein, Ph.D.

Lee Boyagian bought his Pontiac Trans Am eight months ago.

"I haven't been able to drive it so much because of the high gas prices, now that they are back down I've got it out," said Boyagian.

"I definitely feel more inspired to fill up the cars now instead of just getting you from point A to point B," said Timothy Leary from Novato.

With prices plummeting, the first casualty is progress against global warming and the second, if prices stay low, will be sales and development of alternatives.

"The people that are working on alternatives have a much more difficult time getting funding, have a much harder time getting interest in their alternatives when the price of gas is $2 a gallon," said Borestein Ph.D.

"We're seeing almost exponential growth," said Gary Starr from Zap Car.

Starr founded Zap Car in 1994. For now, business is booming at the Santa Rosa-based electric car company.

He says though gas price volatility might wreak havoc with other alternative car companies' business models, theirs is not vulnerable to the ups and downs at the pump because the price of gas is only a small part of its pricing formula.

But Zap has more than cars on its showroom floor. A Segway-like scooter is its best seller.

"If you build a vehicle that's cost-effective whether the price of gas is high or the price of gas is low, people are going to make the right choice," said Starr.

Rep. Woolsey vows that even if voters forget what seemed so clear a few months ago, lawmakers will not.

"I can assure you there are many members, I'm co-chair of the Progressive Caucus and we are going to be pushing for electric car technologies," said Rep. Woolsey.

The road to fossil-fuel independence is paved with batteries and R&D.


Load Comments