Promote cycling for lower gas prices

Aaron is a Redneck economist who blogs from Edmonton, Alberta and values the wide open spaces and independent spirit of that province. Like many who live in the far flung frontier of western states and provinces, he wants lower gas prices. His proposal to do so? "I think the best way to enjoy low gasoline prices is to fund granola-eating initiatives such as bicycle riding and walking."

Aaron is an educated economist so he uses big educated phrases like "Hegelian Dialectic" and "elasticity of demand." Cyclelicious will endeavor to simplify his thesis for the average, bike-riding reader.

Many people want to reduce or eliminate gasoline taxes because of the high prices. If gas taxes are reduced, however, demand will go up. If gas is cheaper, that means people will buy and consume more of this limited (and declining) resource. Selling the product for the same price but with a smaller tax burden might seem like a good thing at first -- the cost for the retailer goes down because less money goes for taxes and so his margin goes up. But, guess what happens to the margin? That's right, the additional profit is taxed. Aaron believes that the final result may actually be higher taxes. He writes:

When the anti-gasoline tax crowd argues for a five cent reduction in gasoline taxes, they are perhaps not anticipating that demand will expand to drive the price up by 4 cents. This 4 cents goes directly to the retailer, assuming the upstream producers don’t increase their prices. The extra 4 cents per litre drives the profit margins of gasoline retailers up. The government taxes these increased profit margins, and the retailer can either throw the increased profits into new capital expenditures (more gas stations), pay the tax, or try to pass it on to consumers. If the retailer raises their price by an additional 1 cent per litre, the price ends up back where it was originally.

The only real way to reduce the price of gas, of course, is to reduce the demand of the product. Aaron's proposal to reduce the demand is promote alternative transportation modes like bicycling and mass transit. "Idealists benefit because their happy little bicycling paradigm has been promoted and self-interested gas consumers can go on consuming the same amount of gasoline at a lower price. Overall demand decreases; the Kyotoites and SUV owners rejoice in a resounding unison."

I think that's a Cyclelicious idea.