The summer travel season is here and with it gas prices that are more expensive than normal. KVCR’s Megan Jamerson spoke with a Scripps College economist about one important factor, the global oil market, plus the opportunity to change our energy future.
As COVID-19 restrictions are lifted, more people are once again commuting to work and planning summer trips, but global oil production has not returned to pre-pandemic levels, so supply is still limited and prices are being driven up. This is normal behavior for OPEC, the group of countries that produces roughly one third of the world's oil said Scripps College economist Nick Kacher.
“They purposefully limit the amount of oil that they supply onto global markets in order to keep prices relatively high," said Kacher. "And so to some degree the prices we pay at the pump depend on how effectively that group of countries is coordinating to keep supply relatively low and keep prices relatively high.”
One benefit of high prices is that people cut down on using gas, which slows the rate of things like climate change as well as pollution, but using high prices to move away from fossil fuels overburdens lower income households who spend a greater share of their income on gas said Kacher.
This plus the market manipulation by OPEC is why many of environmental economists and policy makers see this as an opportunity for the federal government to help the U.S. make the switch to alternative energy sources.
“In our current system where fossil fuels have been heavily subsidized for a long time, where we’ve got a system of vehicles that use fossil fuels, of gas stations built to fuel them, gasoline is probably the most appealing form of energy right now,” said Kacher.
In order to make green options more attractive, Katcher says the federal government needs to make large scale investments in renewables like wind and solar to drive down costs and allow them to compete with fossil fuels. This combined with, California’s policies to phase out gas powered vehicles, said Kacher, could increase consumer demand for gas alternatives and push the energy industry toward for a cleaner, greener future.