That’s one of the explanations that the Heritage Foundation’s Ben Lieberman offers for proposed policies that would jack up gasoline prices (along with household power bills). Writing in the Rochester Post-Bulletin, Lieberman makes this point:
Though the pain at the pump is still well below 2008 levels — this time last year prices were reaching $4 per gallon — there is no room for complacency or for piling on costly green measures. The only reason for the price decline since last summer was a drop in demand due to the recession. But recessions don’t last forever. Indeed, the fact that oil and gasoline prices are creeping back up suggests that a turnaround is near.
In any event, a return to record gas prices is likely in the not-too-distant future. And if Washington decides to make things worse by enacting this ill-advised global warming measure, we may be seeing future weekends where gasoline prices reach $5 or even $6 a gallon. At least, for those who can still afford to drive.
I’ll recommend two other recent think-tank reads on energy policy. The first one is on the American Enterprise Institute’s just-redesigned site. Kevin Hassett, Apama Mathur, and Gilbert Metcalf have just published a study estimating the household distribution of costs associated with a carbon tax. The second was written for the Manhattan Institute by none other than Metcalf, a Tufts University economist. He takes a close look at how the U.S. tax code affects the market for power generation.