Not long ago we were all adjusting to an extraordinary increase in the price of a gallon of gas. As prices accelerated economists speculated on how devastating it could be to our economy if it continued…
Here we are a year later and the world looks quite a bit different. The economy has cracked, but fuel prices, which started coming down heading into the September 2008 Lehman bankruptcy, were not the principal culprit.
However, there is a lot to be learned from the period in 2008 when our gas prices briefly stayed above $4 per gallon. At this price level something very logical occured. Behavior changed. People started driving less. Visible energy pundits like Thomas Friedman encouraged us to study this accomplishment.
So now in 2009, with the economy struggling and the US debate on carbon cap-n-trade in full swing, the same economists are debating the potential impact of this carbon utility tax on the price of electricity.
It’s interesting to consider what would happen if the cost of electricity suddenly accelerated. Like gas, electricity in the US costs significantly less than other developed countries and we have historically taken its availability and low cost for granted. So, if kWh prices were to accelerate, do you think we might see the same logical result – ie. behavior change?