Gas prices are up again, but no matter how high the price of gasoline rises, people will still buy. It is estimated that it would take an 81-cent-per-gallon increase in the price of gasoline for consumption to decrease 6.5 percent. One theory circulating to lower gasoline consumption is car insurance. Insurance companies charge flat rates to customers with similar risks. One risk that is not accounted for is miles driven. It makes sense that the more a car is on the road the more likely a car will be in an accident, so people who drive more should have to pay more for their insurance. This benefits the insurance company by earning more premiums from those riskier clients. At the same time gas prices and consumption are kept are kept at a lower level. It could all be made possible with insurance.
It seems like this idea would result in nothing but positives for example: less traffic accidents, less congestion, cleaner air, less global warming, and less dependency on foreign oil; however, in today’s economy oil companies with monopoly power would simply raise their prices despite lower consumption. Monopolies can control price and quantity. Therefore rather than cause a gasoline shortage, monopolies will increase prices to realize more profits. The real result of the car insurance change is higher gas prices and premiums for commuters and logistical companies.