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Economist: Rising gas prices 'good sign'

Posted January 3, 2011

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— The average price for gas in North Carolina is back above $3 a gallon, and observers expect it to hit $4 by this summer.

Drivers statewide are paying an average of $3.03 for a gallon of regular unleaded, while the national average is $3.07. The WRAL.com FuelTracker puts the average in Raleigh at $3.09 a gallon.

"I used to live 45 minutes away, (but) I moved right next to campus," North Carolina State University senior Patrick Bowen said Monday as he spent more than $42 filling up his tank. "I cycle to class (now). I don't drive to class anymore like I used to."

A few pumps over, Joey Thompson was spending the boss' money to fill up the company car, but he lamented his gas-hungry SUV at home.

"It tears my pocketbook up every week. It's like $70 a week to fill it up. It's getting outrageous," Thompson said.

NC State economist Mike Walden sees a silver lining in higher gas prices, saying it means the US economy has regained its footing and is getting back up to speed.

"Gas prices going up is actually a good sign," Walden said. "$3 is normal. When we were down in the $2 (range), that was abnormal due to the recession.

Gas pump generic Economist: Rising gas prices 'good sign'

"I don't see any thing diabolical, mysterious or underhanded here," he continued. "I think it's just a sign that the worldwide economy is better now than it has been over the last three years."

Oil industry analysts expect the price of gas to continue to rise, possibly reaching $4 a gallon by the summer. Although that might put a crimp in household budgets, Walden said the broader economy can absorb it without much problem.

"If they go up slowly, we can accommodate that," he said. "I think, even at $4 a gallon, that will not kill the economic recovery.'

He said rising gas prices will make alternatives like hybrids and electric cars more attractive to buyers.

Still, Bowen said he's already thinking about a Plan B to get from point A to point B.

"It's going to mean a lot more cycling and a lot less driving," he said. "At some point, you can't cut back anymore. You're sort of stuck."

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  • RM24 Jan 5, 2011

    Has everyone fogotten what happened when gas prices were $4 a gallon a few years ago. It effects the cost of everything. This had the same impact on everyone. Even those driving a hybrid are paying more to ride. Mr Prius/Hybrid owner have you done the math to see how much you paid for that hybrid engine you brag about. For what? 50Mpg. How about the civic or corolla get nearly 40 without hybrid and would save you about 5K at the time of purchase. If you dont drive nearly 100K miles per year then your smart decision was not all that smart. Just food for thought.

  • kjackson47 Jan 5, 2011

    U can't blame them for raising gas prices! They have to, there is too many hands in the pot and not enough millions to pass around. The government and politicians could care less for anybody who is not on the payroll of oil companies, more$ for them. This country need to get its priorities straight before we become self destructive. But I would like to thank all share holders of oil companies for agreeing to raise oil prices

  • dmccall Jan 5, 2011

    Do we need any more proof that NCSU's Economics degree isn't where it should be? There are numerous flaws in his logic, and multiple historic examples prove him wrong.

    Signed,
    UNC graduate

  • sorrowchaser Jan 4, 2011

    Financial Times stays consistent, says oil is starting to threaten economic recovery...

    http://www.ft.com/cms/s/0/056db69c-1836-11e0-88c9-00144feab49a.html#axzz1A75Cvq6Z

    Hmm let me see, believe the words of an NCSU professor who can't seem to explain his odd position, or believe a chief economist interviewed by FT.

    That's a toughie.

  • Diabolical Jan 4, 2011

    By next year, gas prices our going to be our minimum wage paycheck. Then, we will get fired, because we can't drive to work and have no transportation. lol

  • Diabolical Jan 4, 2011

    There goes our paycheck...Outrageous.

  • dlk13ster Jan 4, 2011

    -sorrowchaser

    I think what he was saying was that $3 gas in a recession economy is problematic, because it is associated/accompanied by inflation and a higher cost of living. In a recovering economy, however, it is less so, because in that situation it reflects increased buying power on the consumer, or increased speculation on the commodities market that fuels investment and economic growth.

    I don't think his comments were meant to mean gas prices taken in ISOLATION were indicative of anything; rather, I think he was arguing that given the underlying circumstances and ongoing economic situation, they reflected deeper and more persistent trends taken at that snapshot in time

    In medical parlance, it might be analogous to a case of "same symptoms, different syndromes."

    But again, not an economist, just my attempt at a layman's interpretation. It could very well be that the reverse is true; i.e. he is tailoring his observations to the current political/economic climate of the time.

  • sorrowchaser Jan 4, 2011

    Thus I've proven that in 2008, WRAL and Prof. Walden said the following:

    -$3 gas is painfully expensive.

    -Higher prices were happening because of a weak dollar and commodity speculating.

    -These high prices would cause inflation and ultimately cost people more to buy food and clothing.

    Less than three years later, we are told the following:

    -High gas prices are caused by a good economy.

    -$3 gas is normal.

    -Our economy can "accomodate" the price reaching $4, presumably with no worry it will make food expensive.

    Now please explain what caused this drastic change in 3 years.

  • dlk13ster Jan 4, 2011

    -sorrowchaser

    Then I apologize; I think I missed this link somewhere in the previous 330 comments posted on this thread. If that's the case then yes, you have a right to question Mr. Walden's professional opinion, and I thank you for taking the time to provide evidence to support that opinion.

    However, I do hope you'll at least allow that the economic climate in 2008 was substantially different from 2011; for many reasons, and for many factors that were (in my unqualified opinion) largely independent of which party/personage was in power at the time.

    Walden may have been taking this into account when he made both comments, and he may not. Nothing in either of his quotations still strikes me as patently false, or politically biased. Then again, I'm not an economist, and can't speak to their validity.

    I will, however, refer you to this link (http://www.youtube.com/watch?v=VVp8UGjECt4) for another economist's perspective on economists in general.

    ...as well as for its comedic value.

  • sorrowchaser Jan 4, 2011

    Well dlk13ster,

    I provided a link below to a perfect example of my thesis. WRAL's reporting in 2008, exemplified in an individual article I cited, didn't have much interest in both sides of the debate, and didn't say anything about increased global demand being a sign of a strong economy.

    Here's another example of WRAL interviewing Mike Walden in 2008:

    "The cost of oil is fueling market-wide inflation, said Mike Walden, an economics professor at North Carolina State University...The price of gasoline itself also pushes up food costs. We in this country rely on products and, to some extent, services being driven by vehicle," Walden said."

    http://www.wral.com/news/local/story/2723867/

    Once again, nothing in that article, absolutely nothing, indicated Walden being excited about signs of a strong economy.

    And since I never said anything about Fox News, I'd kindly ask you to stay on topic as well.

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