Kory Swanson just alerted me to this excellent Wall Street Journal article by Holman Jenkins on the economics of buying a hybrid. Of course he points out what it seems that most people finally understand–namely that from the standpoint of personal finace it is simply silly to buy a hybrid. As he notes, the price of gasoline would have to climb to $10 a gallon before the added price could be justified. But Jenkins goes on to explain why driving a hybrid won’t even save oil. Using sound economic logic he points out that:
“If Prius owners consume less, there’s less demand, prices will be lower and somebody else will step up to consume more than they would at the otherwise higher price. That’s the price mechanism at work. Oil is a fantastically useful commodity. Humans can be relied upon to consume all the oil they’d be willing to consume at a given price.”
He also demonstrates that even if it did reduce oil consumption, it wouldn’t make us any more “energy independent,” pointing out that “just the opposite” would happend:
“In the nature of things, the cheapest oil is consumed first, and Mideast oil is the cheapest. Drive a Hummer if you want to reduce America’s reliance on Arab oil. Indeed, if we could all just pull together and drive gasoline prices high enough, we’d be able to satisfy all our fuel needs next door from Canadian oil sands.”
What Jenkins is pointing out is that oil is like anything else. As we cut back on its use–either by force (taxes, regulations, etc) or as a response to actual changes in scarcity–we will cut back on the most expensive sources of oil first and the least expesnive sources last. This is straight forward economic logic–something that discussions of oil priciing and conservation urgently needs and typically lacks.
