gas prices

Transportation policy and the working married woman

Progressives in favor of congestion pricing on highways and in central cities tend to argue for those policies on progressive grounds (shock!) -- that such pricing systems reduce emissions, improve air quality, and fund transit improvements, which benefit lower- and middle-income households. Those are all nice benefits to congestion pricing programs, but we shouldn't neglect the congestion reduction function.

Congestion costs America some $80 billion per year, in the form of lost time and wasted fuel. And as it turns out, commutes extended by congestion have other effects, as well:

There is a strong empirical evidence demonstrating that labor force participation rates of married women are negatively correlated with commuting time. What is more, the analysis shows that metropolitan areas which experienced relatively large increases in average commuting time between 1980 and 2000 also had slower growth of labor force participation of married women.

Long commutes are typically associated with dense cities like New York, but in recent decades, congestion has grown fastest in places with rapid exurban growth -- like Dallas, Riverside (California), San Diego, and Washington, D.C.

What gas taxes don't do

Surprising: state gas taxes appear to have very little effect on either driving habits or fuel consumption. More precisely, there's no correlation between a state's gasoline tax and the amount of fuel its residents use or the amount of driving they do.

Don't believe me? Feast your eyes on these babies:

And:

Those are big, fat, completely uncorrelated blobs. What you're seeing is all 50 states plus D.C. plotted to show a relationship between state gas tax rates and per capita fuel consumption (in the first chart) and per capita miles driven (in the second chart). There is essentially no relationship whatsoever.

Colbert on cost-benefit analysis

How does he do it? Volume!

Cheap oil: Be careful what you wish for

This guest essay was originally published on TomDispatch and is republished here with Tom's kind permission.

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Only yesterday, it seems, we were bemoaning the high price of oil. Under the headline "Oil's Rapid Rise Stirs Talk of $200 a Barrel This Year," the July 7 issue of the Wall Street Journal warned that prices that high would put "extreme strains on large sectors of the U.S. economy." Today, oil, at over $40 a barrel, costs less than one-third what it did in July, and some economists have predicted that it could fall as low as $25 a barrel in 2009.

Prices that low -- and their equivalents at the gas pump -- will no doubt be viewed as a godsend by many hard-hit American consumers, even if they ensure severe economic hardship in oil-producing countries like Nigeria, Russia, Iran, Kuwait, and Venezuela that depend on energy exports for a large share of their national income. Here, however, is a simple but crucial reality to keep in mind: No matter how much it costs, whether it's rising or falling, oil has a profound impact on the world we inhabit -- and this will be no less true in 2009 than in 2008.

The main reason? In good times and bad, oil will continue to supply the largest share of the world's energy supply. For all the talk of alternatives, petroleum will remain the number one source of energy for at least the next several decades. According to December 2008 projections from the U.S. Department of Energy (DoE), petroleum products will still make up 38 percent of America's total energy supply in 2015; natural gas and coal only 23 percent each. Oil's overall share is expected to decline slightly as biofuels (and other alternatives) take on a larger percentage of the total, but even in 2030 -- the furthest the DoE is currently willing to project -- it will still remain the dominant fuel.

A similar pattern holds for the planet as a whole: Although biofuels and other renewable sources of energy are expected to play a growing role in the global energy equation, don't expect oil to be anything but the world's leading source of fuel for decades to come.

Keep your eye on the politics of oil and you'll always know a lot about what's actually happening on this planet. Low prices, as at present, are bad for producers, and so will hurt a number of countries that the U.S. government considers hostile, including Venezuela, Iran, and even that natural-gas-and-oil giant Russia. All of them have, in recent years, used their soaring oil income to finance political endeavors considered inimical to U.S. interests. However, dwindling prices could also shake the very foundations of oil allies like Mexico, Nigeria, and Saudi Arabia, which could experience internal unrest as oil revenues, and so state expenditures, decline.

No less important, diminished oil prices discourage investment in complex oil ventures like deep-offshore drilling, as well as investment in the development of alternatives to oil like advanced (non-food) biofuels. Perhaps most disastrously, in a cheap oil moment, investment in non-polluting, non-climate-altering alternatives like solar, wind, and tidal energy is also likely to dwindle. In the longer term, what this means is that, once a global economic recovery begins, we can expect a fresh oil price shock as future energy options prove painfully limited.

Clearly, there is no escaping oil's influence. Yet it's hard to know just what forms this influence will take in the year. Nevertheless, here are three provisional observations on oil's fate -- and so ours -- in the year ahead.

They affect consumers the same either way, and upstream is simpler and more transparent

In his post on conservatives and carbon taxes, David said:

First, we have to remember all the places the price signal created by an upstream tax can be diluted or stymied on the way to consumers -- i.e., those who can change their behavior in response to prices. Not every industry or business will pass an increase in operating costs directly on to the next link in the chain. Information failures and split incentives abound. Price signals that begin strong, catholic, and clear become fragmented and faint downstream. For all the hype, an upstream carbon price will deliver fairly little incentive to where the carbon is used.

There are two problems with this: It is overstated, and it places blame in the wrong place, i.e., the fact that the tax is levied upstream.

The ‘invisible hand’ is blind to climate externalities and the value of natural resources

When Nicholas Stern, former chief economist at the World Bank, released his ground-breaking study in late 2006 on the future costs of climate change, he talked about a massive market failure. He was referring to the failure of the market to incorporate the climate change costs of burning fossil fuels. The costs, he said, would […]

WaPo editorial reflects lazy resort to gas tax as answer to carbon troubles

The Washington Post has an editorial on the challenges of addressing global warming that contains this passage: To reduce greenhouse gas emissions and lessen dependence on fossil fuels, there must be a price on carbon. A cap-and-trade system is the easiest way to integrate into an international regime, but its pitfalls are legion. A gas […]

Higher gasoline taxes to boost efficiency would be ‘a mistake’

I couldn’t agree more with PEBO on Meet the Press Sunday: New gasoline taxes aren’t the way to boost energy efficiency. Remember, European gas taxes have long been more than $2 a gallon higher than ours, and as of 2002, the average fuel economy of European Union vehicles was 37 miles per gallon, which is […]

Ford drops hydrogen while GM remains confused about ethanol

The car companies have come back to D.C. begging for money. But this time they have put on the table serious restructuring plans. At first glance, Ford’s plan [PDF] appears to me sounder than GM’s plan [PDF]. I’m interested in your opinions. Assuming we believe they will do what they say, the reports reveal a […]