Are There Benefits of Higher Gas Prices?

From Thinking Outside The Boxe’s Sydney Correspondent: Gas prices seem to be rising constantly, and historically are at high levels. If you asked most people if there were any benefits as a result the answer would most probably be a resounding no. And at a time when the economy is in a bad state and many people are out of work high gas prices ensure that American families continue to be squeezed financially. However the news is not all bad. It may seem difficult to believe but high oil prices do provide some benefits, and not just to the oil companies. In this article we will examine some of these benefits and see who is benefitting.

We will start with the people who are benefitting. Those benefitting the most are the owners of oil companies and their shareholders. Although any gains experienced by small shareholders are likely to be offset by the additional cost that they are also paying. The owners of oil deposits also benefit, as well as the people drilling for those deposits. However, if gas prices remain high or go even higher for an extended period eventually these people will begin to lose out as consumers search for renewable energy alternatives, as noted in a PBS Newshour report. CostCo is one of the few retailers that benefit from higher gas prices (while others tend to suffer, as we will see shortly). The reason for this is that they sell gas between six and 12 cents below the average price. And because you need to be a member to buy gas there many people become CostCo members for the lower gas prices alone. However CostCo also know that if people are buying gas from them then they are also more likely to shop there. So CostCo actually makes up what it loses by selling gas at a loss (and much more) because people are buying consumer goods from them. In fact an msn money article written in early March 2012 said that the CostCo share price had risen more than 3% in the year to date.

Interestingly, Forbes identified how consumer spending patterns were changing because of higher gas prices. Instead of driving around to different stores to buy different products Forbes identified that as gas prices rose between January 2011 and January 2012 more and more consumers indicated that they were planning to shop via the internet. In fact, in January 2011, 21.8% of men surveyed said that they planned to spend more time shopping on the internet. By January 2012 that figure had risen to 24.4%. There was also an increase in the number of women planning to spend more online (from 13.7% to 16.7%). As this paragraph and the previous one demonstrate, retailers who do not have an online presence are likely to suffer because of rising gas prices. Similarly high gas prices mean people also have less money to spend in cafes and restaurants. Eating out less also means that people are probably eating healthier meals as well, which is an obvious benefit.

There are other health benefits that are the result of higher gas prices. People tend to drive less, and walk or ride their bikes more. As CBS News correspondent Priya David reported, this reduction in car use has led to lower levels of pollution in the air. And it has been estimated that 2,200 lives have been saved in 2008 because of this. The same report also stated that because people were driving more slowly there were fewer accidents. At the time of the report (April, 2009) it was estimated that if gas prices stayed at $4 a gallon for a year or more there would be 1000 fewer deaths from car accidents per month.These figures are quite remarkable, and by themselves are great reasons to think that higher gas prices are not such a bad thing.

Industry has also benefitted from higher gas prices. Renewable energy companies and companies that make cars that use renewables are benefitting from increased investment and sales. Companies in heavy industries such as steel also find it cheaper to make their products in the U.S rather than shipping their cargo around the world. This in turn leads to the creation of more jobs. As Melissa Hincha-Ownby pointed out in the Huffington Post, mass transit companies also see a spike in the number of users when gas prices are high. According to the American Public Transport Association (APTA) Americans made 10.4 billion trips on public transport in 2011. This represented an increase of 2.3% over the previous year.

Some benefits of higher gas prices such as people driving less and using public transport more are not surprizing. The benefits to the oil industry are not likely to shock anyone either. However, the sheer number of lives saved because of less pollution and slower driving would get anyone’s attention. These figures and the variety of other benefits caused by high gas prices are not going to lead too many people to suggest that gas prices should stay at high levels but it does demonstrate that a little pain at the pump is not necessarily a bad thing.
http://www.pbs.org/newshour/bb/business/jan-june05/oil_1-24.html

http://money.msn.com/top-stocks/post.aspx?post=eefc66fe-556b-41ca-b0f1-fd389480c220 http://www.cbsnews.com/2100-500202_162-4264742.html http://www.huffingtonpost.com/2012/03/12/mass-transit-ridership-gas-prices_n_1340039.html

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