Why $8 Gas Might Be Good for Us Chris Pummer isn't afraid of the pain at the pump. In a recent column, he argues that $8-a-gallon gas would actually be good for the U.S., improving the country's financial and political future.

Why $8 Gas Might Be Good for Us

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Here's a thought that didn't occur to you as you were filling up your tank with $4.35-gas this morning. Man, I wish it were twice as expensive. Well, maybe if your uncle was Walter Texaco, you would have thought that way. But otherwise, everyone just bemoans the high price of gas, everyone except Chris Plummer - I'm sorry, Chris Pummer, who says, maybe - maybe he's playing a little devil's advocate, but he says that eight-dollar-a-gallon gas could actually be good for us. Pummer penned his thoughts in a recent MarketWatch column that has attracted over 1,300 comments so far. I talked to him about his article yesterday.

(Soundbite of reverse playback)

PESCA: So, let me quickly read through your eight reasons why eight-dollar-a-gallon gas will work. One, rest in peace for the internal combustion engine. Two, economic stimulus. Three, wither the Middle East's clout. Four, deflating oil potentates. Five, mass transit. Six, no sprawl. Seven, more financial discipline. And eight, it will ease global tensions.

Now, we're not going to take them all one by one, but let's just take them in groups. There are, I think, three or four of them that are related to the environment, like the internal combustion engine one and the mass-transit development one. Tell me, what do you think eight-dollar gas is - why would that translate to a better environment?

Mr. CHRIS PUMMER (Columnist, MarketWatch, Wall Street Journal): Well, I think in many respects we're arguing back and forth of whether or not there's global warming or not, and to some degree, it's a silly argument. The real argument is, are we technologically advanced at this point, you know, to not be so dependent on oil? And you know, we all know this stuff is poison. I mean, it poisons the water. It poisons our air.

And you know - at this point, the ability to - if we price crude oil and we price gasoline at a point that we start to change our behavior, you know, we start to wean ourselves off this, which is a technology that's, you know, easily - the internal combustion engine over a hundred years old. And you know, we all know we should evolve past it, but there's, you know, there's - there really hasn't been any, you know, push, you know, to get us to where we'd like to go.

PESCA: Do you think it may be a little pie in the sky to think that a crisis will get us to the solution? Maybe it will get us to the solution faster, or maybe it won't get us to the solution, and then we're in crisis without a good alternative for the internal combustion engine. In fact, it would be a little bit better if there were a nice solution, and then we could just blow off however gas was going to be priced.

Mr. PUMMER: Well, I - you know, I think the problem is everyone raises a specter of the economy going in the tank if gas were at eight dollars. And you know, the simple fact is this, that gas has tripled in price over the last six years. You know, it's been slow and steady, but it went from a buck-thirty to close to four dollars a gallon.

And in spite of what everyone feared, at least through the first quarter of this year, we still haven't fallen into a recession. So, obviously, the economy can shoulder a little, you know, can shoulder some of that. I'm not suggesting we go to eight-dollar gas overnight, but you know, however long it takes, and continuing demand from China and India, it's just going to continue to push the price up.

But it's in this interim period between now and then, you know, that, you know, ultimately, you know, not only will we start to change our behavior, but we'll, you know, hopefully start to, you know - I don't want to say, you know, go into crisis mode, but we'll really start, you know, putting initiatives into place that will get things done. Instead of sitting back and going OK, you know, wouldn't it be nice if we had more buses? Or wouldn't it be nice if we drove to Alaska? I mean, we have to get there.

PESCA: It's the necessity-is-the-mother-of-invention argument.

PUMMER: Absolutely.

PESCA: And so, well, let me ask you a little bit more in depth. If gas does continue to rise to eight dollars a gallon, it will be, because demand is high, and if demand is high, that demand will be coming from China and India, so even if the United States invents some technology to get itself out of the gas crisis, how much will the environment really benefit, if China and India are the ones driving this demand for gas? Won't there be even more cars in China and India than there ever were in the United States?

PUMMER: Well, you know, I think China and India wouldn't necessarily have to make the same mistakes we have had. I mean, you know, the Prius has taken off in the United States, because of gas prices, obviously, you know, but one of the things it also did was, it said - you know, there was some pretty hefty tax incentives, you know, to buy a Prius.

And it - you know, if we, you know, are at the point where we treat this the way we should, which is to continue offering tax incentives, you know, that sort of thing, we - if we extricate ourselves from Iraq, I mean, all those billions of dollars could go into, you know, into targeted tax credits for all manner of things, whether or not it's fuel-cell research or what it might be.

Ultimately, though, if we do get to the point where we are developing these things, and you know, we are arguably the world's industrial leader, you know, at that point we start to develop these things and we start to ship it to China and India, and that becomes the - you know, that becomes what helps us without balance of trade. Because, you know, they're all consumer goods producers these days.

PESCA: OK. As far as the economy in the United States, how more expensive gas might long-term help the economy, do you think that it would be, in the short term at least, a drain on the GDP?

PUMMER: Well, it will, and I think, you know, people have raised, you know, some interesting, you know, kind of arguments, and I think one of the most interesting ones is people throwing up, oh, you know, you're going to kill the poor. You know, the poor are not going to be able to afford eight-dollar gas. And you know, I think it's rather interesting that a lot of people are suddenly coming, you know, to the defense of the poor, who typically don't really give the poor a lot of thought.

And if that's something that we're concerned about, you know, maybe at that point, if, in fact, we are in crisis situation, we turn around and we increase the minimum wage, in an effort to - you know, to make that more affordable to the poor. I mean, at the same time all those SUVs that will get dumped on the market, when gas gets more expensive, will be that much cheaper, and you know, people will be able to afford inexpensive transportation. That at least will be able to make up the difference in their gas costs for a time.

PESCA: There are - I think most economists do agree that a high GDP is pretty much highly-correlated with good environmentalism. Like, if you look at the poorest countries in the world, they don't really care at all about environmentalism. And if you just look at America, the people who are most likely to be environmentalists, are generally better off. So is that an argument about, you know, let's keep America rich and that's a way to solve our environmental problems vis-a-vis gasoline?

PUMMER: Well, you know, I think, when you look at it, and here's really what it comes down to, it's going to be the SUV driver who ends up having to spend 200 dollars to fill his or her gas tank, you know, that is finally going to go, wait a second, something has to be done here. And until we all uniformly understand that, you know, and you know, it's not uniform right now, you know, the pain is starting to be felt by - I mean, it cost me for my minivan - and I am a family of five, though, I will add - you know, for my minivan it's cost me 75, 80 bucks, you know, to fill up.

I'm stomaching it. I don't like it, but if it gets much higher, I can tell you that, you know, my behavior, which I'm already changing, is going to change dramatically. So I think that's where the issue is. As it starts to really become universally painful, you know, that's when we're ultimately going to react.

PESCA: Well, I tell you, Chris, if you said my GMC Yukon instead of my minivan, you would have lost all credibility.

(Soundbite of laughter)

PESCA: MarketWatch columnist Chris Pummer. Thanks a lot, Chris.

PUMMER: Oh, sure thing.

PESCA: And coming up on the show, we'll hear about what life is like for homeless people living in London's Heathrow Airport.


And we'll take a trip down memory lane all the way back to, ah, 1989. That was a good year. This is the BPP from NPR News.

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