Think gas is too pricey? Think again.

Ezra Klien on paying the full price of oil (including externalities):

When I started researching this column, my working assumption was that a world in which gasoline's total costs were represented at the pump would be a world in which our consumption of gasoline was radically different. But almost all of the experts I spoke to said that wasn't true. In part, that's because years of regulations and innovations have made us much more efficient at finding, extracting, refining and using oil. If an energy source as dirty as coal had to pay its true cost, we'd pretty much stop using it. Disasters aside, that's not the case with oil. Oil might be cheap compared with its true costs, but adding those costs in wouldn't necessarily make it unaffordable. Our behavior might change at the margin, but we'd still be an oil-thirsty society.

That gets to the bigger issue, which is that energy sources are cheap or expensive only in relation to one another. And the heaviest anchor beneath our reliance on oil is that, at this point, there's nothing to replace it with.

“We're pretty much stuck with our dependency on oil,” Parry says. “We don't have any substitutes. Even if we hugely increase the price on oil, we'd only have limited impact on it. People need to drive and get to work.”

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