Are we returning to better times?

I was cleaning out a box from a few years ago - one of those boxes I packed before I moved, and never unpacked. In the bottom of the box was a small piece of paper that reminded me of better, happier times.

What was it - a family photo? A note from an old girlfriend? Nope - my pictures are all digital, and my ex-girlfriends all imaginary. It was a gas station receipt from July of 2005. I had stopped at Tom's Mobil in PA driving up to my parent's house in Jersey, and bought 10 gallons of gas... for $1.94 a gallon. Yup, a tank of gas for less than a dub.

Gas prices are coming down - I recently paid $3.25 a gallon at the Sunoco near work, down from over $4 this summer. Of course, winter is coming, and with it demand for home-heating oil, so prices may stabilize or rise in the near future - but for now, we are better off than we were a few months ago.

I find myself getting gas every 5 days or so, and get about 10 gallons. That's 6 tanks a month. If gas was $4.05 a few months ago, I'm paying 80 cents less a gallon, which is about $48 less a month. That's $48 more in my wallet, and that's a good thing. It means I can spend it on other things, or save it. It means that money isn't going to a nation that isn't a big fan of us. And it also means that the companies that ship stuff to us are spending less to do it, which helps keep things like food prices from going up even more.

Via Insty comes an environmentalist who sees this as a bad thing. And yes, decreasing the price of something generally increases demand, and cheaper gas means more driving.

Then again, gas is a product with a fairly inelastic demand curve, at least in the short run. I can't call off work because gas is too expensive, and I can't trade in my pickup for a Smart without taking a bath on the trade-in value (plus, I don't know how I'd get my hamfest inventory and two 6-foot tables into a Smart).

But $3.25 is still pretty pricey for gas, at least compared to what it was 3 years ago. I think it will have some long-run implications on where people live, what they drive, what automakers build, and the intensity of research on alternative energy. And even in the unlikely event that it goes back to $2, people will probably still factor the possibility of rising prices in their decisions, because they have seen it happen and know it might happen again.

If you want to reduce consumption, gas taxes are a better way to do it than high priced gas, because at least our incompetent government gets the money, instead of a foreign government that is both incompetent and evil. But raising prices of gas is a tough sell, and one that probably should at least be suspended to a time that the economy isn't in the shitter. If people are really hurting as much as the media and politicians say they are, than having an extra $50 in their pockets from gas savings is probably a huge help, and one we should celebrate.