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Keep Rising Gas Prices in Perspective

Keep Rising Gas Prices in Perspective

Photograph by Michael S.Williamson/The Washington Post/ Getty Images

It’s all over the news: rising gasoline prices. And it’s important because gasoline in many ways is the lifeblood of our economy.

We’re a mobile society in a large country. We live in far-flung suburbs, and many major cities have weak and expensive mass transit systems. When the price of gas goes up, Americans feel it.

But our $3.97 per-gallon average gas price is relatively cheap. The same gallon of gas costs as much as $8 throughout Europe, more than $6.50 in Japan, and $5.40 in Australia.

We all feel pain when the price goes up, but it’s basically a matter of supply and demand. Developing countries need more fuel to keep their factories humming and the world is struggling to meet the demand.

Fortunately, new technologies, such as hydraulic fracturing, or “fracking,” have made it possible to extract petroleum and natural gas from rock, creating an energy boom in North America. Some projections show the U.S. becoming self-sufficient by 2020.

So why is everyone talking about gas prices?

We see gas prices all the time. We’re reminded of the high price every time we pass the giant signs at a filling station, when we turn on the radio or television, when we talk to friends, and even on the late-night comedy shows.

Yes, high gas prices cause some pain, but so do other price increases. The price of coffee, for example, increased 19 percent last year. Peanut butter, bread, and milk—family staples—increased 27 percent, 6.7 percent, and 9 percent, respectively. We don’t obsess about these prices.

So let’s focus on solutions—driving less, driving higher-efficiency cars, using natural gas as a fuel source, and expanding the supply of petroleum.

No one likes paying more at the pump; I certainly don’t. But let’s keep rising gas prices in perspective.

Harold L. Sirkin is a Chicago-based senior partner of The Boston Consulting Group (BCG), a professor at Northwestern University’s Kellogg School of Management, and co-author, most recently, of The U.S. Manufacturing Renaissance: How Shifting Global Economics Are Creating an American Comeback (Knowledge@Wharton, November 2012).

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