Gasoline, Markets, and Regulators

June 3, 2007

Andrew P. Morriss

Does gasoline cost too much, or too little? Recently we have heard that gasoline costs too much. As gas prices soared in 2005, for example, the Sierra Club called on Congress to force prices lower and “put money back in the pockets of Americans who need it, not in the coffers of multinational oil companies.” Prices that are “too high” are held responsible for everything from funding terrorism to pushing Americans into poverty. Yet, we also regularly hear that gasoline costs too little. In 2006, for example, New York Times pundit Thomas Friedman demanded a $1/gallon tax to force gasoline prices high enough to make “the most promising alternatives—ethanol, biodiesel, coal gasifi cation, solar energy, nuclear energy and wind” able to compete economically with gasoline. Prices that are “too low” are alleged to be responsible for ills from suburban sprawl to global warming....

Gasoline, Markets and Regulators