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$4 gas hurts, but it can help, too

By Johnny T. Shull
For the Salisbury Post
Gas prices are at an all-time high in the United States and you do not have to be an economist to know that fuel costs are having an impact on North Carolina’s families and businesses. Because the price of gas plays a central role in the overall cost of transportation, higher gas prices can push up the cost of many other goods and services. Collectively, high gas prices, inflation and trouble in the housing and credit markets have thrust the U.S. economy into a slowdown.
With all of this bad economic news how can anyone argue that there is a brighter side to $4/gallon gasoline? Yet there is a bright side to high gas prices: our air is cleaner, we are emitting fewer of the gasses that may contribute to climate change and we are stimulating demand for new products that create new jobs for North Carolinians.
To cope with this country’s highest gasoline prices on record, consumers are cutting out trips, turning to public transportation, car-pooling and telecommuting in ever-increasing numbers. As a result , the overall demand for gasoline in the United States is projected to fall for the first time in 18 years.
As we drive less, we spew fewer pollutants into the air, including those that contribute to asthma and acid rain. Asthma is the No. 1 one cause for hospitalization, lost school days and health care costs associated with children in North Carolina while acid rain creates a host of other problems for our state, including the acidification of our lakes and streams. Since auto emissions may contribute to climate change, we could be having a positive impact there as well.
While some consumers are cutting their driving to a minimum or turning to other forms of transportation, still others are demanding vehicles with better fuel economy. Automakers are taking notice. Recently, both Ford and General Motors announced that they are cutting production of gas-guzzling trucks and SUVs and increasing production of smaller cars, hybrids and crossovers. This production reversal by these major automobile manufacturers underscores the fact that higher gas prices are driving down demand for inefficient vehicles, which is also good news if you care about a cleaner, greener environment and if you want to spend less money at the pump.
In addition to reducing America’s fleet of gas-guzzling SUVs, high gas prices are encouraging the development and production of new products to reduce transportation costs and our dependence on imported oil. With fuel efficiency at the top of many new car buyers’ minds, companies are deepening investments into the research and production of advanced composite materials (think light, fuel efficient and strong) as well as tires and new engine technology. Colleges, universities and private companies in North Carolina are all actively engaged in this innovative work.
The production and development of alternative sources of fuel is also being stimulated. The new Biofuels Center of North Carolina recently awarded grants and loans to research institutions and companies around the state to promote the production of biofuels ó alternatives to gasoline derived from products found right here in North Carolina. Earlier this month, Lt. Gov. Beverly Purdue announced the 13 recipients of first-ever Green Business Fund grants administered by the North Carolina Department of Commerce. Among the recipients were biofuels companies in Asheville, Wilson, Southport and Pittsboro.
These North Carolina companies are proof that opportunities await entrepreneurs in the new energy economy. However, innovation is risky and comes at a steep price. There is no doubt that North Carolina families want relief from high gasoline prices and there is no doubt that policymakers want to help. If this new breed of alternative energy entrepreneurs is to be successful, North Carolina policymakers must be responsive by removing regulatory barriers that could hamper innovation in these markets. Government officials should work with the private sector to make sure that regulations at the state and local levels do not create undue burdens on those seeking to grow jobs in these industries.
The brighter side of $4/gallon gasoline is that changes in consumer preferences are cleaning our air while creating incentives for entrepreneurs to take a risk. In the short run there is little that can be done about the price of gasoline. However, our future is brighter, thanks to $4/gallon gasoline and the entrepreneurs who will pave the way to cheaper, greener and more efficient ways to fuel our vehicles and power our lives.
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Johnny Shull is a GlaxoSmithKline faculty fellow at the Institute for Emerging Issues at N.C. State University.

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