Many around the blogosphere and in the news are saying that these record-setting gas prices are not high at all. Some are even saying that prices at the pump should be more than what they are now. These people argue that these ridiculous prices are lagging behind the rate of inflation and are finally catching up to that level. I am no economic expert (although I did ace microeconomics :o) ), but I firmly believe that the prices that we pay for energy should stay behind the rate of inflation. Don't totally discount me at this moment; let me explain myself. The prices of our goods and services rise naturally due to inflation; it is the nature of the market for them to do so. Energy prices, whether for home heating or automobiles, should stay below the rate of inflation because energy is what drives our American economy. Every good and service relies on energy prices. If these prices are adjusted to the rate of inflation that means that the price of products will rise above the rate of inflation since that price naturally fluctuates with regards to inflation. So that means that everything else costs above inflation if energy prices are not below that level. That means that we pay above the rate of inflation for the essentials of life, such as food and clothing. And that means economic recession! I know personally that the prices in the grocery stores have risen dramatically recently (or at least in my area); can we blame this on inflation? No, we can blame it on the price of energy going far beyond where it should be at. Inflation does not adjust that quickly, and we can only blame these soaring gas prices. There is not much that we can do to keep energy prices below the rate of inflation. These prices have remained below inflation for many years but has just recently started its dramatic upward trend. This is due a volatile market that depends on delicate conditions in the Middle East, mother nature, and capacity-filled refineries. We are also in the midst of a world oil shortage; demand far exceeds supply. Any economist will tell that prices will naturally rise to account for the lack of product for every consumer. What do we need to do? We need to make the switch away from nonrenewable resource as are primary energy source! It was not a bright idea to begin with to rely on a source that balances with a volatile market and does not renew itself. We have sort of set-up a disaster for ourselves. We need to to it quickly; the world is running shortage of oil, and we could probably run out sooner than we think!
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