Tuesday, July 8, 2008

10 Things to Like about $4/gallon Gas

Wow. I am so impressed with Amanda Ripley, who wrote this story for Time magazine. She offers sympathy about the suffering and expands on this list:

1. Globalized jobs return home
2. Sprawl stalls
3. Four day workweeks
4. Less pollution
5. More frugality
6. Fewer traffic deaths
"If gas remains at $4 per gal. for a year or more, expect as many as 1,000 fewer fatalities a month, according to professor Michael Morrisey at the University of Alabama at Birmingham and associate professor David Grabowski at Harvard Medical School, who calculated that estimate for TIME. That means annual deaths could be cut by almost one-third — a public-health triumph."

7. Cheaper Insurance
8. Less Traffic
9. More Cops on the Beat
10.Less obesity
"A permanent $1 hike in prices may cut obesity 10%, saving thousands of lives and billions of dollars a year, estimates Charles Courtemanche, an assistant professor of economics at the University of North Carolina at Greensboro."

To read it yourself, see the full article.

Monday, July 7, 2008

Should Brave Men Die So We Can Drive?

This is one of the headlines used on public service announcement posters during World War II to encourage conservation of fossil fuel. This 2 minute compilation shows how times and values have changed. While we look back at old tobacco ads with horror "Doctors agree that smoking BRAND NAME is the healthiest choice," these ads generate some nostalgia for doing the right thing.

Other headlines include:
"oil is ammunition"
"all fuel is scarce...plan for winter now"
"have you really tried to save gas by getting in a car club?"
"Is your trip necessary?"

This group of ads shows how energy conservation is patriotic. In this election year, and in the next administration, we would do well to encourage Americans to think about their most deeply held values -- a safe, secure, and sustainable future for us and our children. It is high time to push out a new round of PSAs to complement policy at the state and national levels.

Tuesday, July 1, 2008

How much does it cost to drive?

The IRS formally increased the number it uses for cost per mile car travel, from 50.5 cents per mile, to 58.5 cents per mile. The question for drivers is -- are you sharing that cost or sucking it up all by yourself?

I recently did an analysis of AAA 2007 cost data for driving. I wanted to understand how much the rising cost of gas is actually changing the real costs of driving. [These aren't quite real costs since they don't include any of the externalities associated with driving like global warming, protection of oil resources, asthma, car accidents, among others.] AAA numbers are averaged over five years, assuming you own the car for the first five years of its life.

Today, with gas at $4 a gallon, looking at the two extremes of car types, it costs

$18.60/day for a small sedan ($6,795/year)
$31.00/day for an SUV or pickup truck ($11,309/year)

This covers travel of 41 miles per day (15,000 miles per year), average for Americans.

When -- not if -- gas goes to $5 a gallon, it'll be

$21.66/day for a small sedan ($7,906/year)
$33.32/day for an SUV or pickup truck ($12,161/year)

What was particularly interesting to me is how the rising price of gas has transformed the variable costs of driving. When gas was $1/gallon, it was only 9% of the total cost of owning and operating a small sedan. Today, at $4/gallon, gas ranges between 28 and 30% of the cost of operating a car. When it is at $5/gallon, that'll be 32-35%. With such high variable costs, people are really having to think twice and three times about when and how they drive. [see blog entry on changed driving behaviors]

This is so much money!!!

Back in 2006, 17% of household income went toward cars. I ask myself: if the median household income in the US is $48,000/year, what percent of income is going to car transportation today? A recent study found that in households with cars, they own on average 2.28 cars per household. Now comes some very murky and suspect assumptions, just to get it into the ballpark. Those households are unlikely to have 2.28 new cars, so what if we just round down and say 2 cars that are 0-5 years old are going to stand in for 2.28 cars of unknown age. And that households will have one big car and one little car, which is kind of like saying they have 2 average-sized cars.

OK, if we accept these bad assumptions, the answer to the question:

What percent of household income is going today to car transportation when gas is $4/gallon?




Another way to look at this is to use a a report written in September 2005 by Mark Singer of the Consumer Federation of America. His estimates of gas prices for 2005 were about $1.80/gallon. For prices found between 1995-2003 (his baseline) he found little elasticity in demand. Here is his table:

We know that $4/gallon seems to have been a tipping point for demand. And $4 is more than double $1.80. But what if we imagine that people today are spending about double on gas, taking into account some reductions in demand? That would put low income groups spending 20% of their incomes just on the gas.

Washington, I think we have a problem.

Americans need options to traveling around by car all by themselves. Some of those options can happen fast (GoLoco! and for those lucky enough to live in cities feet, bike, transit, train); some will take longer (changing where we choose to live, work, shop, creating dense mixed use communities, adding more transit of all kinds, reducing fossil fuel dependence on all motorized modes).

Next Mr. President: are you listening?