Eight reasons you’ll rejoice when we hit $8-a-gallon gasoline – MarketWatch – by Chris Plummer

I selected this article because I really believe in it. It wasn’t until I became a fan of studying economics that I began to believe that rising gas prices are in the LONG TERM ECONOMIC INTEREST of the US economy as these higher prices will incent consumers and businesses to move towards alternate forms of fuels.

I am also no longer in support of US offshore drilling, not because I am an environmentalist, but an economist that understands that it will be necessary to take higher, painful increases in petroleum to incent businesses and consumers to pursue alternative energy and more efficient transportation solutions. Voluntary conservation or asking oil companies to pursue alternative fuel development is nice in concept, but poor in results.

I now root for “steadily climbing oils prices” to provide greater incentive to move faster to more efficient forms of transportation and spawn alternative energy solutions. It’s a little like going to the dentist: it’s not fun, but it is necessary and will leave us in better condition when its over.

For one of the nastiest substances on earth, crude oil has an amazing grip on the globe. We all know the stuff’s poison, yet we’re as dependent on it as our air and water supplies — which, of course, is what oil is poisoning.

Shouldn’t we be technologically advanced enough here in the 21st Century to quit siphoning off the pus of the Earth? Regardless whether you believe global warming is threatening the planet’s future, you must admit crude is passé.

Americans should be celebrating rather than shuddering over the arrival of $4-a-gallon gasoline. We lived on cheap gas too long, failed to innovate and now face the consequences of competing for a finite resource amid fast-expanding global demand.

A further price rise as in Europe to $8 a gallon — or $200 and more to fill a large SUV’s tank — would be a catalyst for economic, political and social change of profound national and global impact. We could face an economic squeeze, but it would be the pain before the gain.

The U.S. economy absorbed a tripling in gas prices in the last six years without falling into recession, at least through March. Ravenous demand from China and India could see prices further double in the next few years — and jumpstart the overdue process of weaning ourselves off fossil fuels.
Consider the world of good that would come of pricing crude oil and gasoline at levels that would strain our finances as much as they’re straining international relations and the planet’s long-term health:

1. RIP for the internal-combustion engine

They may contain computer chips, but the power source for today’s cars is little different than that which drove the first Model T 100 years ago. That we’re still harnessed to this antiquated technology is testament to Big Oil’s influence in Washington and success in squelching advances in fuel efficiency and alternative energy.

Given our achievement in getting a giant mainframe’s computing power into a handheld device in just a few decades, we should be able to do likewise with these dirty, little rolling power plants that served us well but are overdue for the scrap heap of history.

2. Economic stimulus

Necessity being the mother of invention, $8 gas would trigger all manner of investment sure to lead to groundbreaking advances. Job creation wouldn’t be limited to research labs; it would rapidly spill over into lucrative manufacturing jobs that could help restore America’s industrial base and make us a world leader in a critical realm.

The most groundbreaking discoveries might still be 25 or more years off, but we won’t see massive public and corporate funding of research initiatives until escalating oil costs threaten our national security and global stability — a time that’s fast approaching.

3. Wither the Middle East’s clout

This region that’s contributed little to modern civilization exercises inordinate sway over the world because of its one significant contribution — crude extraction. Aside from ensuring Israel’s security, the U.S. would have virtually no strategic or business interest in this volatile, desolate region were it not for oil — and its radical element wouldn’t be able to demonize us as the exploiters of its people.

In the near term, breaking our dependence on Middle Eastern oil may well require the acceptance of drilling in the Alaskan wilderness — with the understanding that costly environmental protections could easily be built into the price of $8 gas.

4. Deflating oil potentates

On a similar note, Venezuela’s Hugo Chavez and Iran’s Mahmoud Ahmadinejad recently gained a platform on the world stage because of their nations’ sudden oil wealth. Without it, they would face the difficult task of building fair and just economies and societies on some other basis.
How far would their message resonate — and how long would they even stay in power — if they were unable to buy off the temporary allegiance of their people with vast oil revenues?

5. Mass-transit development

Anyone accustomed to taking mass transit to work knows the joy of a car-free commute. Yet there have been few major additions or improvements to our mass-transit systems in the last 30 years because cheap gas kept us in our cars.

Confronted with $8 gas, millions of Americans would board buses, trains, ferries and bicycles and minimize the pollution, congestion and anxiety spawned by rush-hour traffic jams. More convenient routes and scheduling would accomplish that.

6. An antidote to sprawl

The recent housing boom sparked further development of antiseptic, strip-mall communities in distant outlying areas. Making 100-mile-plus roundtrip commutes costlier will spur construction of more space-efficient housing closer to city centers, including cluster developments to accommodate the millions of baby boomers who will no longer need their big empty-nest suburban homes.

Sure, there’s plenty of land left to develop across our fruited plains, but building more housing around city and town centers will enhance the sense of community lacking in cookie-cutter developments slapped up in the hinterlands.

7. Restoration of financial discipline

Far too many Americans live beyond their means and nowhere is that more apparent than with our car payments. Enabled by eager lenders, many middle-income families carry two monthly payments of $400 or more on $20,000-plus vehicles that consume upwards of $15,000 of their annual take-home pay factoring in insurance, maintenance and gas.

The sting of forking over $100 per fill-up would force all of us to look hard at how much of our precious income we blow on a transport vehicle that sits idle most of the time, and spur demand for the less-costly and more fuel-efficient small sedans and hatchbacks that Europeans have been driving for decades.

8. Easing global tensions

Unfortunately, we human beings aren’t so far evolved that we won’t resort to annihilating each other over energy resources. The existence of weapons of mass destruction aside, the present Iraq War could be the first of many sparked by competition for oil supplies.

Steep prices will not only chill demand in the U.S., they will more importantly slow China and India’s headlong rush to make the same mistakes we did in rapidly industrializing — like selling $2,500 Tata cars to countless millions of Indians with little concern for the environmental consequences. If we succeed in developing viable energy alternatives, they could be a key export in helping us improve our balance of trade with consumer-goods producers.

Additional considerations

Weaning ourselves off crude will hopefully be the crowning achievement that marks the progress of humankind in the 21st Century. With it may come development of oil-free products to replace the chemicals, pharmaceuticals, plastics, fertilizers and pesticides that now consume 16% of the world’s crude-oil output and are likely culprits in fast-rising cancer rates.

By its very definition, oil is crude. It’s time we develop more refined energy sources and that will not happen without a cost-driven shift in demand.

• PintPrice.com – the price of beer anywhere in the world

  The price of beer in 200 countries.

  Pint Price is a database of World Beer Prices. Use this site to find the best watering nation. Pint Price has also been described as an important economic iindicator…

  tags: economics, PPP

pintprice.com – the price of beer anywhere in the world

The theory of purchasing power parity (or PPP) holds that in the long run, the price of a particular basket of goods should adjust across countries and currencies to “cost” the same amount regardless of the currency the goods are denominated in. In other words, one dollar should buy the same amount of “stuff” in the US as it does in Mexico, China, the Netherlands or anywhere else in the world. If a dollar buys MORE in one of these countries once it’s been converted to the local currency, it implies that the local currency is undervalued and should adjust in the long run to achieve parity in the amount it can purchase in dollar terms.

One popular measure of purchasing power parity, devised by the folks at the Economist magazine’s intelligence unit, is the Big Mac Index, which measures the price of McDonald’s Big Macs in over 100 countries where they can be purchased. You can read more about this index here.

The Economist magazine recently reported on an new alternative to its own PPP index, “the Price of a Pint”:

Barflies around the world provide a useful service for their beer-drinking comrades at PintPrice.com. The prices of pints of lager are compared on the basis of anecdotal evidence from beer-drinkers around the world, so figures are regularly updated. There are some surprising results. Beer in Zambia and Burundi seems eye-wateringly expensive considering that they are among the world’s poorest countries. The French overseas départments of Guadeloupe and Martinique charge just about as much as in mainland France. Beer-loving America and Britain fall somewhere in the middle. Happily for sports fans at the Beijing Olympics, a pint in China is just $2.46.

I thought it might be useful to some of our graduating seniors planning their summer vacations or gap years. Pay close attention to the data in this table.

(source: http://www.economist.com/displayStory.cfm?story_id=11333131)

So, if cheap beer is a priority in your vacation decision, it looks like North Korea and Myanmar are ideal destinations. I must say, I am relieved to see that Switzerland, my own new home, is not in the top ten… but it is far from cheap.

The website will tell you the average price of a pint of beer in any country in the world, and then break it down to cities within each country. In Zurich, my soon to be home, a pint costs the equivalent of $6.57 US. Compared to my hometown of Seattle, Washington, where a pint goes for $3.25, that’s exactly double the price! Surprisingly, however, a pint of beer here in Shanghai goes for a shocking $5.15, more than double the Chinese average of $2.35.

Apparently, the price of beer has more to do with the local supply and demand than with relative exchange rates. Where the Big Mac Index offers a rather genuine approach to determining purchasing power parity (since the Big Mac is an identical product sold by the same restaurant facing similar costs in over 100 countries), a pint of beer is a bit more subjective a measure of PPP. Quality of beers clearly differ in locales as diverse as North Korea and Luxembourg, not to mention the incomes of beer drinkers, the number of domestic brewers, excise and value added taxes, consumers’ price elasticities of demand, and so on.

As summer vacation approaches, however, vacation planners may care to take into account the “Price of a Pint” index of purchasing power parity. Clearly, one’s dollars will go much further at bars in some places than others.

I know what you 18 year old American high school grads are thinking, “Mexico or Canada?” You’ll just have to follow the link to find out!

(Disclaimer: Mr. Welker is in no way encouraging his former students to travel to certain places based solely on the cheap price of beer there, merely to avoid places where beer is clearly out of their price range!)