Speaking of oil prices, the Washington Post reports this morning that Americans say it would take a gasoline price of $4.38 per gallon to significantly cut back their driving. In addition, "the federal Energy Information Administration (EIA) yesterday reported that gasoline consumption last week was up 2.6 percent from the same week a year earlier, slightly higher than the trend so far this year." In other words, U.S. gasoline prices over $3 per gallon (less than half of European prices, by the way) are not causing what economists call "demand destruction," at least not to any signficant degree. Why is this? According to the Washington Post:
The surprisingly resilient consumption of gasoline is explained by two factors. First, though prices are just shy of the modern inflation-adjusted peak set in March 1981, Americans' incomes have risen over the past quarter-century. The share of the U.S. household budget devoted to gasoline and oil spending fluctuated between 3.4 percent and 3.6 percent throughout the 1960s, rose to 5 percent in 1981 after the two oil price shocks of the 1970s, then fell back to an all-time low of 2.1 percent in 1998. Last year, it was up to 3.8 percent.Second, Americans regard most of their driving as essential, not discretionary. With the development of suburbs and exurbs, where there is little public transportation and shopping is done at distant stores or malls, people need cars for almost every outing.
In other words, gasoline still makes up a very small percentage of families' budgets, and suburban/exurban Americans remain "addicted" to the stuff. That's the story right there, pretty much. Interestingly, a new Washington Post poll about "who's at fault" for higher gasoline prices indicates that Americans are pointing their fingers in all the wrong directions:
*33% believe higher gasoline prices are the results of oil companies' profit/greed.
*15% believe it's the Iraq war
*15% believe it's politics
In other words, 63% of Americans are pointing to "causes" that are definitely NOT causes of recent, higher gas prices. "Michael A. Salinger, director of the bureau of economics at the Federal Trade Commission, replied that the structure of the industry had not played any significant role in the rise in prices." And it's certainly not the Iraq war, as Iraqi oil exports have remained roughly steady in recent months. Politics? What on earth does that mean, I have no idea, but nothing happened in the last few months that would cause a spike in gasoline prices.
What ARE the causes of recent, higher gas prices? Big kudos to the 15% if Americans who point to "economic" or "market forces" (supply and demand). Also, congrats to the 2% of Americans who understand that the "time of year" - we're approaching peak summer driving season - plays a role. And mad props to the 6% of Americans who say "other" - perhaps they're thinking of unplanned problems with refineries, for instance, which have played a significant role recently.
Now, I have no problem with windfall profits taxes at a time of war. I have no problem with considering the breakup of oil companies. But frankly, unless we slash our oil consumption, we are not going to gain control over our own destiny anytime soon. And, according to the new Washington Post poll, that's not going to happen unless we see much HIGHER gasoline prices, not lower prices. That's not what people want to hear - although, paradoxically, it's exactly what they're saying! - but it happens to be the truth.
"Suburban and Exurban". that is my other choice. We spend every waking minute developing sprawling subdivisions with no efforts to provide public transportation, we create big box grocery stores and everything else, and then we wonder why demand is inelastic.
When I go out to the sprawling new neighborhoods of Fairfax and Loudoun County I see humongous developments which have only two or three roads feeding their traffic out to an already overburdened highway system. Driving west on Route 7 you encounter shopping centers on the left and developments on the right, and the road is so huge and oriented toward through traffic only that people in the developments have to drive to the shopping centers across the street for fear of being killed if they tried to walk. In most such developments there seems to have been little effort to develop things for easy pedestrian access, and of course the public transportation system is bare bones. If we ever want to decrease our demand for gasoline we need to have an approach which takes into account these issues.
In Mexico there is instant mix-use zones because zoning laws, if they exist, are poorly enforced. Most people can set up a store in their houses if they wish to do so. And many do. My parents did. I also had a micro candy factory a few blocks away and a micro bakery. We had a nurse giving care two blocks away. We had two mini grocery stores within two small blocks.
There were a series of small strip malls a block away as well. The mini tortilla factory was 4 small blocks away, and so was the beef and pork butcher and the chicken and egg store. A few people ran restaurants out of their driveways. There was also a sports store and a haircut place in the strip mall.
Oh, and there was no parking for the strip mall. You had to walk to it.
There were a few stationary stores, especially near the schools, which were about 5 blocks away, also ran out of driveways or living rooms, modified to store the supplies.
One could get one's needs met within 5 small blocks. And these small blocks were small: each block is about the size of three suburban homes.
And if you couldn't get something nearby, you would go downtown, taking the bus.
But how many would like to live like this? Those who do, already live in the city :)
Reason: Its OPEC, Phyllis Schaefly (2000)
[http://www.eagleforu...]
"The real place to levy the blame is OPEC, the 11-country oil cartel (plus Mexico) that conspired to raise the price of oil. OPEC is a criminal price-fixing conspiracy and, if its members were reachable by U.S. law, its sheiks would be in jail."
Reason: Its World Demand and geo-political instability (Andrew Dart Blog)
[http://www.akdart.co...]
"The major causes of high gas prices include the increased demand for oil in places like China and India, high gasoline taxes, civil unrest in Venezuela, war in the Middle East, political instability in Nigeria."
Reason: Its lack of U.S. refinery capacity:
Gasoline for America's Security Act of 2005
[http://www.louisdb.o...]
"It serves the national interest to increase refinery capacity for gasoline, heating oil, diesel fuel, and jet fuel wherever located within the United States, to bring more reliable and economic supply to the American people."
Reason: Because they can ! (Greed)
[http://www.pww.org/a...]
"Consequently, profit-maximizing oil corporations are free to charge "whatever the market will bear," despite the impact on the working-class public and the economy as a whole."
Reason: Market manipulation (from 2002)
[http://www.rgj.com/n...]
"WASHINGTON - Oil executives disavowed internal memos obtained by congressional investigators that suggest a campaign to manipulate gasoline supplies to boost prices, especially in California and the Midwest.
The internal documents were cited at a hearing by the Senate Governmental Affairs investigations subcommittee Tuesday as evidence that oil companies plotted to reduce supplies to assure high prices in tight gasoline markets."
Reason: Not Enough Drilling (especially in Artic Wildlife Refuge) from 2005
[http://www.consumera...]
"President Bush, speaking in Ohio, said high gasoline and oil prices are "legitimate concerns" for Americans, and the answer is a long-range energy plan that includes drilling in an Arctic wildlife refuge."
Want to know where to fill up your SUV in the global market??:
Oslo : $6.48 a gallon
Tehran: .33 a gallon
Happy Driving this Memorial Day week-end !
Right, because some/most? people simply use their credit cards and rack up debt to pay for their gas. We'll be paying for this in a few years....
I combine trips whenever possible and admit it is not an easy discipline to adopt. Fortunately, it is an easy one to keep once you have adopted it. I walk or bike when I can - I walk and bike more mileage than I drive. I take public transportation. When I do drive, I usually drive a mid sized ULEV that gets 34 mpg. I can get all my sporting goods into it (and I have a lot of them), and I don't really need an SUV. If I were running a home repair business, for example, and had ladders and equipment to haul, then I would need an SUV. I am a lawyer. Lawyers do not generally need SUVs.
Three cheers to those who drive a hybrid or who elect to drive something lower profile and higher in efficiency and who sacrifice a bit of their personal space to pick up a friend or two or three to carpool on the way to work.
Money you do not squander on gas is money you are free to squander on something else. Like retirement. Or college for your kids.
We Americans love to be free to waste money, oil, whatever. Maybe we should consider looking at being free to be responsible conserve some of these things for ourselves and for our kids, too?