Covering the Economy: Gasoline Prices

Democrats are (because of the environmentalist wing of the party) generally in favor of higher gasoline taxes and higher gasoline prices--except when gasoline prices are high). Republicans are in favor of letting oil markets "work"--except when gasoline prices are high.

Here's a sampling of stories:

Here's AP:

AP Josef Hebert | Plans Produced to Attack High Gas Prices : WASHINGTON — High gasoline costs and the political fallout they may create are producing a flurry of proposals from both Republicans and Democrats aimed at soothing motorists' anger. But nobody is predicting prices will ease anytime soon. Democrats are blaming Republicans, especially President Bush, while Republicans argue that congressional Democrats have stood in the way of more domestic oil production.

Bush directed his environmental agency Tuesday to stand ready to ease clean air rules if they interfere in gasoline supplies this summer. Industry analysts said that likely would have only a marginal influence on prices. The president also announced that the government would not take 10 million barrels of oil out of the market for the U.S. emergency reserve as had been planned. Bush maintained that "every little bit helps," even though industry analysts said that was so little oil it would have no impact on prices.

The president expressed frustration at his inability to force down prices. "What people are seeing at their gasoline pumps reflects the global economy in which we live," he acknowledged in a speech aimed at countering critics who have accused him of being soft on oil companies and ignoring high prices at the pump.

Bush vowed to pursue any collusion or price gouging and directed the Justice Department to help states pursue allegations that "gas prices have been unfairly manipulated." But the White House opposes additional federal laws to address price gouging or strengthen antitrust laws as they pertain to oil companies, as some members of Congress have proposed. "There are very good laws on the books," said Al Hubbard, the president's chief economics adviser. "What's important is that those laws are enforced aggressively."...

Here's Gary Richards from the Mercury News:

MercuryNews.com | 04/26/2006 | Soaring gasoline prices forecast: By Gary Richards Mercury News: California's average gasoline price jumped two cents Tuesday to $3.14 a gallon, and some analysts said drivers could be paying $3.35 or more by Memorial Day, May 29. The gloomy forecast came on the same day President Bush announced measures he said could curb rising prices -- freeing up oil reserves and temporarily waiving regional clean-air requirements.

Those moves may have calmed the energy market -- crude oil and gas futures fell slightly Tuesday. But most experts say they will provide little significant relief over the next few weeks. ``We wish we could tell you there's light at the end of the tunnel, but it's probably an oncoming train,'' said Sean Comey, spokesman for AAA of Northern California.

Bush called for a nationwide probe into possible price manipulation. He directed the Energy Department to delay oil shipments this summer to the Strategic Petroleum Reserve, the government's fuel stockpile. The change would free up about 12 million barrels of oil over the summer, a small percentage considering the nation consumes 20 million barrels a day. ``It's more symbol than substance,'' said David Sandalow, an energy expert at the Brookings Institution.

Skeptics, including Sen. Barbara Boxer, D-Calif., questioned Bush's call to investigate price gouging, saying the Federal Trade Commission is already probing the issue because of legislation Democrats pushed through Congress. The agency's findings are expected late in May.

And here's Chris Cilizza from the Washington Post:

The Fix -- Chris Cillizza's Politics Blog on washingtonpost.com: Parsing the Polls: The Politics of Gas Prices: You can't swing a cat in Washington, D.C., this week without hitting a politician talking about the rapid increase in gas prices and what should be done about it. President George W. Bush on Tuesday sought to address the problem, calling for an investigation into possible price gouging the increased in alternative fuels like ethanol. The president ruled out setting a fixed price for gas.

The rising cost of gas -- now around $3 a gallon across the country -- has Republican strategists concerned (and Democrats elated) about its impact on the national political environment this fall. Already on the defensive over Iraq and the handling of Hurricane Katrina, congressional Republicans are seeking to project a proactive response to gas prices -- although most members admit that there is no quick or easy solution. (Expect GOP leaders to do a series of events on Thursday as Exxon Mobil announces its profits.) Democrats, for their part, have tried to tie gas prices to Republicans' alleged "giveaways" to oil companies over the past few years.

Who will win this rhetorical fight? And is the public paying attention? Let's parse the polls to find some answers.

Two things immediately become apparent when examining recent polling on gas prices: Americans see the rising costs as a major burden and are generally unhappy about what the Bush administration has done to address the problem.... 70 percent of those tested said the "recent price increases in gasoline" have caused "financial hardship" for their families.... 23 percent of respondents said gasoline prices have caused "a severe hardship that affects your ability to maintain your standard of living," while 26 percent identified it a "moderate hardship that affects you somewhat but does not jeopardize your current standard of living." Just more than one-quarter of voters (28 percent) said the gas price increase has caused them no hardship.... [C]onsiderable anxiety exists in the general public about gas -- its price and availability. It is a prototypical pocketbook issue -- one that every American (Democrat, Republican and independent) can identify with and one that people want the government to address.... [T]he public is dissatisfied with the Bush administration's approach to solving the problem. In the Post-ABC survey, just 23 percent approved of the job the White House was doing on the "situation with gasoline prices," while 74 percent disapproved....

Putting aside the fact that more than one-third of the sample put the blame on President Bush, the finding that a near-majority of voters cite U.S. oil companies as the root of the problem should concern Republican strategists.... [V]oters are much more open to believe that Republicans are helping out their friends in Big Oil -- especially when the president and vice president have each served as high-ranking officials in oil or energy services companies.

Expect Democrats to hammer home those connections in the weeks and months ahead of the fall election, and they're likely to lay out a broad vision of their own on energy policy. These numbers seem to suggest a considerable opening for Democrats on the issue (much more so than corruption in Congress), but it remains to be seen if any alternative they offer will resonate with disgruntled voters. A plan should emerge before this summer, according to an informed party strategist...

Comments

[Tom C]

Prof - Could the "we're really running out of oil faster than you think" crazies be right? Is there any reliable analysis of claims that extractable resources are much smaller than oil companies have led us to think? After all, I'm afraid that the law of supply and demand actually does work. It would be very hard to govern this country if energy were not cheap, no matter which political party you're in.

[bakho]

The link is obvious isn't it? Big oil was clobbered by the fuel efficiency wave of the late 1970s that dropped refining to less than 70% of capacity. It took over a decade to get capacity utilization back over 90%. Big oil does not want fuel efficient vehicles because it hurts their profits.

For this reason, Congress has dropped the ball on fuel efficiency and placed consumers in a position to be screwed by big oil. I don't hear the calls for a new round of CAFE standards, but the basic supply and demand curves indicate that fuel efficiency would reduce price.

Because of refinery capacity, supply is currently inelastic. Because demand is subject to a large decrease if efficiency standards are implemented, business is reluctant to invest in new refining capacity. A 10% increase in fuel efficiency would provide sufficient distance between demand and the inelastic portion of the supply curve that skyrockets prices to significantly lower prices. A 10% increase in fuel efficiency would still be less than 30 mpg fleet average. 30 mpg is pathetic when 40-50 mpg is easily attainable.

There is no easy short-term fix, but the sooner we increase fuel efficiency, the sooner the prices will drop.

[graph]

I was pretty stunned by this graph:

http://www.pollkatz.homestead.com/files/NEWBUSHINDEX_28670_image001.gif

comparing Bush' popularity ratings to the inverse of gas prices, and suggesting that the electorate cares about *nothing* except for gas prices.

h/t Billmon.

[anne]

"Democrats are (because of the environmentalist wing of the party) generally in favor of higher gasoline taxes and higher gasoline prices--except when gasoline prices are high)."

Democrats had best be in favor of low gasoline prices, and sensible Democrats are and pay no attention to the loony "we have to suffer more by raising gasoline taxes now that we are already suffering" voices :)

[Cranky Observer]

> comparing Bush' popularity ratings to the
> inverse of gas prices, and suggesting that
> the electorate cares about *nothing* except
> for gas prices.

Which I think might portend a little bit of a problem for the Republic, if indeed we are anywhere near peak oil or even just maxing out global supply capability. In either case prices will go up, pain will be suffered, and politicians will be ping-pong'd back and forth with each goverment having an incentive to do as much damage as possible while they are in office (cf Cheney).

Cranky

[anne]

Actually, I find a public focus on energy prices promising since the time has long come for us to be conscious of trading butter for guns. We have been trading $120 billion a year in butter for guns, for the lunatic war and occupation of Iraq. Once we understand this, beyond the intense tragedy inherent in war, we can choose peace over any coming war. We can wish for an immediate leaving of Iraq, and support those who so wish.

[pgl]

Two additions from the non-MSM side of things: (1) Newshounds catching Sean Hannity blaming liberals; and (2) more seriously, Dean Baker's Beat the Press takes on the ANWR 1 million barrel a day canard. Dean's snarky yet brilliant comment about Iraq and Hannity's babbling are both addressed over at Angrybear.

[anne]

Leave Iraq immediately and with the $120 billion saved, lower gasoline taxes as well as ever so much more that might be done to help ourselves and others.

[anne]

http://select.nytimes.com/2006/04/26/opinion/26dowd.html

April 26, 2006

A Prius in Every Pot
By MAUREEN DOWD

It's taken over five years, but George W. Bush finally made a concession speech to Al Gore.

He conceded that America needs to conserve, by buying hybrid vehicles and developing new energy sources.

Trying to calm the yips in his party and the country over exploding gasoline prices, the president sounded a bit like a wild-eyed Ozone Man himself yesterday, extolling the virtues of alternative fuel derived from cooking grease, sugar, grass, wood chips, soybean oil and corn.

But then he got ahold of himself. "You just got to recognize there are limits to how much corn can be used for ethanol," he said, standing in front of a bucolic mural. "After all, we got to eat some."

You could run a fleet of S.U.V.'s on the gas that W. was spewing about fuel. Bill Clinton would have been more likely to crack down on fast food than W. and Dick Cheney would be to crack down on Big Oil.

Even the usually supportive Wall Street Journal editorial page chastised Republicans for putting on "Chuck Schumer and Nancy Pelosi fright wigs" to shout about corporate greed and market manipulation.

W.'s big move was to ever so slightly beef up a federal investigation into oil company price manipulation that's been under way since Katrina. "It's a great idea," said the Democratic leader, Senator Harry Reid. "So good that we passed a law last year calling for that."

Price manipulation could explain the marginal — why gas went from, say, $2.70 to $2.90 — but not why gas went from $1.40 to $2.70. That's more about fundamental forces: Chinese and Indian demand, markets spooked by Iran's threats, Nigeria's unrest, Venezuela's talk of nationalizing its oil industry, and the Pentagon's bungling of the restoration of Iraq's infrastructure.

Gasoline prices may be hurting average folks, but the oilers who helped put the Boy King and the Duke of Halliburton in office with lavish donations are enjoying record profits and breathtaking bonuses.

The Oilmen in the Oval, incompetent in so many ways, have brilliantly achieved one of their main objectives: boosting the fortunes of the oil industry and the people who run it....

[dale]

"the president sounded a bit like a wild-eyed Ozone Man himself"

Notice the language Dowd uses- a not so flattering reference to Al Gore. Bob Somerby at the Daily Howler has been focusing on this main stream media pundit disparagment of Gore for years now.

We often point our fingers at the radical right- the Swift Boat anti-Kerry- Fox News- Rush Limbaugh,etc. Somerby says its the mainstream "liberal" media figures like Dowd and Cohen and Chis Mathews, etc. who trashed Gore and brought us President Bush.

Even now, Dowd can't help but cast Gore in this unfavorable light.

[Mark Thoma]

A small qualification - the admin likes high oil prices if it is politically convenient at the moment:

The Bush administration scrapes the barrel searching for good news about Iraq’s economy.... U.S. Deputy Treasury Secretary Bob Kimmitt ... downplayed the bad news ... Kimmitt said the unexpectedly high price of oil has allowed the Iraqi government to balance its books anyway — a rare administration plug for high energy prices. –Michael M. Phillips, WSJ Wash Wire

http://blogs.wsj.com/washwire/2006/04/25/oldies-but-goodies/

[s9]

The really weird thing about the electorate caring about nothing *except* gas prices is that the electorate also cares absolutely zero about conserving energy.

I have a one-way commute from San Francisco to Cupertino, and I drive 55 MPH regularly. Twice a day, for about an hour each way, I am sitting behind my wheel marvelling at the number of eight and twelve cylinder engines speeding past me at 70+ MPH on a highway mainly used as a connector between two cities 50 miles apart.

I save about 20% on my fuel expenses by driving 55 MPH compared to the 80 MPH I would normally feel comfortable driving (except when the CHP are in stepped-up enforcement mode). Apparently, all those voters who care so deeply about high gas prices really don't care deeply enough to save 20% or more on their fuel costs by slowing down on I-280.

I am *so* past tired of hearing Americans bitch about gasoline prices. Sell the Chevy Earthpaver, buy a Prius or a Civic Hybrid, slow the fnck down to 55 MPH on the freeway, *then* bitch at me about the price of gasoline. Until then, I'm just gonna laugh my ass off at you.

[ent lord]

ANWR is the new talking point/explanation for the current situation, judging from talk radio today. "If the Democrats had not blocked the ANWR drilling, this new source of oil would be coming online now just in time to cover the shortage. The whole problem is due to Democrat obstructionism".
I guess Rush, Hannity, et. al. do not know oil has to be refined and if we do not have the refineries, we can pump til doomsday (next Thursday currently), and not solve the problem.
During the oil embargo (is anyone old enough to remember that) we had odd/even days, limiting amounts of gas sold and other strategies that may not have solved the whole problem, but it does illustrate there are solutions. (I won't mention the WW II ration cards but I still have some, just in case)
The Republicans won't tackle the problem because they don't want to endanger their base, the SUV to church crowd.

[Matt]

thanks for the price/approval graph. very telling stuff.

[anne]

http://www.nytimes.com/2006/04/25/world/middleeast/25pipeline.html?ex=1303617600&en=d01c31129dc2e8f2&ei=5090&partner=rssuserland&emc=rss

April 25, 2006

Rebuilding of Iraqi Pipeline as Disaster Waiting to Happen
By JAMES GLANZ

When Robert Sanders was sent by the Army to inspect the construction work an American company was doing on the banks of the Tigris River, 130 miles north of Baghdad, he expected to see workers drilling holes beneath the riverbed to restore a crucial set of large oil pipelines, which had been bombed during the invasion of Iraq.What he found instead that day in July 2004 looked like some gargantuan heart-bypass operation gone nightmarishly bad. A crew had bulldozed a 300-foot-long trench along a giant drill bit in their desperate attempt to yank it loose from the riverbed. A supervisor later told him that the project's crews knew that drilling the holes was not possible, but that they had been instructed by the company in charge of the project to continue anyway.

A few weeks later, after the project had burned up all of the $75.7 million allocated to it, the work came to a halt.

The project, called the Fatah pipeline crossing, had been a critical element of a $2.4 billion no-bid reconstruction contract that a Halliburton subsidiary had won from the Army in 2003. The spot where about 15 pipelines crossed the Tigris had been the main link between Iraq's rich northern oil fields and the export terminals and refineries that could generate much-needed gasoline, heating fuel and revenue for Iraqis.

For all those reasons, the project's demise would seriously damage the American-led effort to restore Iraq's oil system and enable the country to pay for its own reconstruction. Exactly what portion of Iraq's lost oil revenue can be attributed to one failed project, no matter how critical, is impossible to calculate. But the pipeline at Al Fatah has a wider significance as a metaphor for the entire $45 billion rebuilding effort in Iraq. Although the failures of that effort are routinely attributed to insurgent attacks, an examination of this project shows that troubled decision-making and execution have played equally important roles.

The Fatah project went ahead despite warnings from experts that it could not succeed because the underground terrain was shattered and unstable.

It continued chewing up astonishing amounts of cash when the predicted problems bogged the work down, with a contract that allowed crews to charge as much as $100,000 a day as they waited on standby.

The company in charge engaged in what some American officials saw as a self-serving attempt to limit communications with the government until all the money was gone.

And until Mr. Sanders went to Al Fatah, the Army Corps of Engineers, which administered the project, allowed the show to go on for months, even as individual Corps officials said they repeatedly voiced doubts about its chances of success.

The Halliburton subsidiary, KBR, formerly Kellogg Brown & Root, had commissioned a geotechnical report that warned in August 2003 that it would be courting disaster to drill without extensive underground tests.

"No driller in his right mind would have gone ahead," said Mr. Sanders, a geologist who came across the report when he arrived at the site.

KBR defended its performance on the project, and said that the information in the geotechnical report was too general to serve as a warning.

Still, interviews by The New York Times reveal that at least two other technical experts, including the northern project manager for the Army Corps, warned that the effort would fail if carried out as designed. None of the dozen or so American government and military officials contacted by The Times remembered being told of the geotechnical report, and the company pressed ahead....

[s9]

Oh, and while am at it, let me disclose here that I'm neither a Democrat nor a Republican. I'm a Green, and my thoughts about gasoline taxes is that we ought to abolish the payroll tax and make up the lost revenue with gasoline and other retail energy consumption taxes.

No doubt, this is regarded by sensible economists everywhere as lunacy of the highest order. Democrats especially should denounce me as a dangerous whackjob who represents the views that should be purged with extreme prejudice from the rank and file of the party. Yeah yeah, I've heard it. That's why I'm a Green now.

[Matt]

well, as long as you've heard it, i won't repeat it.

[huh?]

re that price/approval graph.

Is that thing for real? Has it been cleverly manipulated?

Reason for doubt: *NOTHING* in the social sciences correlates that well.. Notice that it doesn't even lag or lead; it just tracks, up and down, week after week and month after month.

I mean, correlations that good are usually the province of wackos or people selling hot stock tips in strategic peanut butter reserves.

[trostky]

As part of the 30 percent who don't feel any particular hardship from the gas prices -- I live 4 miles from my office and have no kids to ferry around to soccer games -- I shouldn't gloat, but ...

Let's say your 15,000-mile-a-year driver is now paying $1,500 instead of $1,000 for 500 gallons of gas (30 mpg -- forget the Hummer owners for a moment). That 500 bucks a year is real money, but it comes in niggling doses of $10 a week. I simply cannot believe that that sum causes a "financial hardship" to 70 percent of residents of the wealthiest country on the planet.

Or are U.S. consumers really stretched that thin? Is that negative savings rate finally kicking us in the backside after a minor (in the scheme of things) oil shock?

[s9]

"well, as long as you've heard it, i won't repeat it."

In the meantime, Democrats continue to be completely without principle when it comes to energy policy. At least, Republicans are *deliberately* evil.

[Matt]

yeah! take that you bad republicans!

[Tom]

s9 - that makes your time worth 5.35 /hr.
Right or wrong, many people will not use their time that way. I have also seen that total enery use has gone from 16% to 10% of people's income in the last 25 years. No wonder people are changing their behavior.

[Ed]

While I don't think BushCo would ever do anything to harm the oil companies, I do think the current rhetoric can be helpful in steering public sentiment in favor of oil independence.
Raising CAFE standards would be a good start and probably politically safe (for the GOP) if it looks like an unavoidable bipartisan effort. They should also be able to drop the silly SUV tax break without too much pain. However, I don't expect anything but talk from the GOP at this stage.
Obviously if the Democrats get power in November they could put many more options on the table, but I worry that they won't risk political backlash with any new found majority they get.
We probably need some lucky gee whiz technological innovation to truly get out of this mess. Hopefully the current crisis will finally open the floodgates on the rampant corruption in all our energy industries and the outcry will finally steer money and policy in a new direction.
I still find it amazing how the US has gone backwards since the energy crisis of the early 70's. I guess that shows you what you get from 30 years of the GOP running the executive branch!

[Barkley Rosser]

Well, Bush's efforts besides speechifying about renewable fuels and ANWR, has been to loosen enviro controls on gasoline "temporarily," and to stop buying oil for the strategic petroleum reserve.

Regarding this last item, a perennial fave of prezzes frustrated by high oil prices, I shall pass on an anecdote I heard from a Clinton econ insider (no, it was not Brad DeLong). It comes ultimately from Joe Stiglitz when he was CEA Chair for Clinton.

So, oil prices were up (I forget the year) and Stiglitz met with Clinton and Leon Panetta, the then Chief of Staff, to discuss the issue of releasing oil from the strategic petroleum reserve. So, Stiglitz speechifies that a) doing so will not affect the market much and b) prices will go back down again soon anyway (less certain this time around). Panetta responded to this with, "Great! So, we can release some oil, not cause any problems, and get credit for the price of oil dropping!" which they did.

BTW, all those calling for China to revalue the yuan-renmimbi upwards should keep in mind that this will only put more upward pressure on the dollar price of oil, not to mention all that stuff in Wal-Mart.

[t_do]

Whackjob is spelled with an h?

[Ralph]

Have you noticed that there is a determined campaign to denigrate hybrid cars with claims that the initial premium on hybrid cars (about $5,000) cannot be recouped through gas savings until about the 7th year? Forbes has the most recent article denigrating hybrids. But as gas prices climb towards $4/gal this argument will become more untenable. If you search for web sites with actual testimonials from hybrid car owners however you will find most are happy with the gas savings and reliability of their cars. The oil companies appear to be trying to walk a fine line between super-profits from higher gas prices and causing a stampede towards more efficient vehicles.

[Michael Cain]

"Oh, and while am at it, let me disclose here that I'm neither a Democrat nor a Republican. I'm a Green, and my thoughts about gasoline taxes is that we ought to abolish the payroll tax and make up the lost revenue with gasoline and other retail energy consumption taxes."

Doesn't this fall harshly on the elderly who still drive, but no longer work? Or those who work in positions that are not subject to the federal payroll tax (employees of states or cities that "opted out" of the SS system when they were allowed to do so)? The US tax system is so convoluted that any substantial revision is going to gore somebody, but I'd like to avoid that problem with the elderly, and the elderly poor in particular.

[Michael Cain]

"Have you noticed that there is a determined campaign to denigrate hybrid cars with claims that the initial premium on hybrid cars (about $5,000) cannot be recouped through gas savings until about the 7th year?"

I seriously considered the Civic Hybrid last time I was car shopping, but ended up with the regular Civic. The regular version is getting 38 MPG for me in real driving. I don't drive a lot of miles, and my back of the envelope calculation indicated that even with $5 gas, it was going to take a bit over ten years to recover the $5,000 difference. Longer if I included discounting of the future savings. I intend to have the car that long, but figure that world-wide demand destruction as crude goes past $80 or $90 per bbl will keep US gas prices below $5/gal. I'm hoping that by the time I have to buy a replacement the technology will be available to do an all-electric Civic.

[anne]

"I seriously considered the Civic Hybrid last time I was car shopping, but ended up with the regular Civic. The regular version is getting 38 MPG for me in real driving."

What a nice number :)

[s9]

"The US tax system is so convoluted that any substantial revision is going to gore somebody, but I'd like to avoid that problem with the elderly, and the elderly poor in particular."

We're talking about elderly poor people who must still drive long commutes to maintain subsistence living standards, yet who do not have wage income and are therefore subject to the payroll tax. Setting aside for the moment questions about how large a constituency we are really talking about, isn't this exactly the sort of thing that a tax credit should be targeted to mitigate?

[s9]

"s9 - that makes your time worth 5.35 /hr."

I get more than the fuel savings out of driving 55 MPH, and my employers don't pay for any of my time spent commuting.

[mobile]

I don't know what assumptions Tom used, but if s9 gets 18 MPG at 55 miles per hour and gas is $5/gallon, your time is worth $7.82/hour. It gets worse from there if you have a more efficient car or if gas is cheaper. Sounds like maybe s9 should be bitching about the price of his time.

[Ian Whitchurch]

Couple of points ...

US production is constrained by people. The industry stopped hiring in the 1980s, and there's a big hole where those people should be. Countries serious about increasing domestic production should invest in new Petroleum Engineering faculties, and in scholarships etc for new students.

US small independants are a bunch of whining welfare queens. For them, going over the border to the next county is a major initiative. Forget tax breaks, accelerated depreciation and the rest of it ... you want more money, go find more #$%^^%# oil.

Land Reform would be nice. At least standardise on one set of rules per region ... me, I'm partial to Oklahoma's rules - at least allow a standard deal (ie 12.5% royalty at wellhead to a trust account) if landowners cannot be contacted after reasonable efforts (ie 2 weeks advertising in the county and the regional newspaper).

Having all the refineries on one, hurricane-affected coast is a Bad Idea. Especially if they are next you your major oil-import terminal.

Ian Whitchurch
Northern Territory Oil

[anne]

http://www.calvorn.com/gallery/photo.php?photo=6390&u=99|3|...

Snowy Egret in Flight
Long Island--Tobay.

Be careful of birds, Ian :) Always nice to read your terse incisive comments.

[piotr]

I am getting different results that modile.

Scenario A: s9 drives 55 miles in an hour and uses
55/18 = 3 gallons.

Scenario B: s9 drives 55 miles in 40 minutes and uses 20% more gas, hence 3.6 gallons.

Difference: 1/3 of an hour, 0.6 gallons, so we are getting 1.8 gallons for an hour.

However, let us switch the order of the scenarios.

A: s9 commutes on a highway and uses 2/3 of an hour, so this time is part of his working time.

B: s9 commutes for 2/3 of an hour, and then spends an extra 1/3 of an hour VOLUNTARILY, UNNECESSARILY. Which makes it LEISURE TIME! (defined as a voluntary and unnecessary activity). During this time s9 enjoys the scenery, listens to the favorite music, ponders the tableau of human foibles and vanities and boost his (or her) selfesteem. And not only he (or she) pays nothing for this pleasure, but he (or she) actually gets some money in return!

The problem is that if the speed limit of 55 minutes is enforced, 1/3 of an hour goes from leisure time to the working time. Unless, unless -- you were an activist who unnecessarily, voluntarily forced that change to happen!

-----

Note that you can mix bussiness and pleasure, e.g. drive for 2 seconds for bussiness and then enjoy 1 second of leisure, then back to work and so forth.

[Charles]

Tom C: There's no shortage of hydrocarbons at the right price.

There's a shortage of the ability of the environment to absorb the products of their combustion before agricultural and marine productivity start to drop. We aren't at peak oil. We're at peak pollution.

To huh?: I suggest you check Pollkatz's creds. I'm sure the graph is accurate. Prices and public opinion are not very sticky.

s9, Tom has a point in saying that your decision to drive slow means that you waste time rather than gas. Now, it's not a very good point, but it passes. What I would say is that the real problem is demographic. So many people live far from work that they waste both time and gas.

Barkley Rosser, if your anecdote is accurate, the Clinton Administration performed brilliantly, not only keeping the oil reserve at adequate levels, but buying low and selling high.

[s9]

"It gets worse from there if you have a more efficient car or if gas is cheaper."

My logbook says I've averaged about 33 MPG since adopting my 55 MPH regimen, opposed to 27 MPG when I averaged 75 MPH on the highway. Note: I shaved only about eight minutes off my one-way commute by speeding, since there is a fair distance on city streets folded into my route.

So let's do the math boys and girls.

In exchange for 80 more minutes per week spent driving, I save— in fuel costs alone, never mind the other savings— right about 3 gallons of gasoline. I burn premium gasoline, and this morning I paid $3.50/gallon to fill up my tank, so we're talking $10.50/week at current prices, or $7.87/hr if you want to measure it that way. Alternatively, over the course of a year, that adds up to about $546.00 in savings in exchange for a little under 70 hours of extra drive time out of a total of more than 1000 hours per year. And I get to spend those 70 hours doing the thing I get paid to do every day, all day, no matter where I am or what I'm doing: think. Remind me again how this is supposed to be a dumb thing to do on my part.

My point is that most people who bitch about high gasoline prices, particularly working people who burn most of their gasoline commuting, are just complaining to have something to complain about. Their actual behavior tells you what they really think, and their actual behavior shows they really don't give a crap about the price of gasoline. If they did, they'd take steps to save money. Sell the Chevy Earthpaver that gets 10 MPG, and replace it with a vehicle that gets 40+ MPG. Eliminate their 50-mile one-way commutes to work by moving closer to the office. Drive 55 MPH on the highway and cut out needless driving. Americans aren't doing any of that, and why should they? They clearly value their Chevy Earthpavers and the time they spend not driving them a *whole* lot more than they are letting on.

So, why should we give a flip that Americans claim to be annoyed by $3.50/gallon? It's obviously just a convenient pose for most of them.

[s9]

"...The problem is that if the speed limit of 55 minutes is enforced..."

There are many fine reasons to be a vegetarian. Moral authority is not one of them.

[trostky]

s9,

If you live in the Bay Area, you know well that "moving closer to the office" isn't always easy -- let alone financially viable even with higher gas prices.

[Arun Khanna]

Leading universities from U.S., EU and Japan need to band together for concentrated efforts in producing synthetic oil at a competitive price for fossil fuel substitutes. Governments should fund such efforts. Our dependence on despotic regimes needs to have a sunset provision.

[dilbert dogbert]

S9,
I frequent your route with my 1999 subaru and try to drive between 65 and 70 in the right hand lane just to stay out of the way of the crazies. Lots of people, even at those speeds, come up behind me and try to sniff the car's tail pipe. I don't know where they expect me to go to get out of their way but it happens all the time. At 55 mph I would fear for my life.
Good Luck

[Charles]

Tom C: There's no shortage of hydrocarbons at the right price.

There's a shortage of the ability of the environment to absorb the products of their combustion before agricultural and marine productivity start to drop. We aren't at peak oil. We're at peak pollution.

To huh?: I suggest you check Pollkatz's creds. I'm sure the graph is accurate. Prices and public opinion are not very sticky.

s9, Tom has a point in saying that your decision to drive slow means that you waste time rather than gas. Now, it's not a very good point, but it passes. What I would say is that the real problem is demographic. So many people live far from work that they waste both time and gas.

Barkley Rosser, if your anecdote is accurate, the Clinton Administration performed brilliantly, not only keeping the oil reserve at adequate levels, but buying low and selling high.

[s9]

"If you live in the Bay Area, you know well that "moving closer to the office" isn't always easy -- let alone financially viable even with higher gas prices."

Well yeah— here's what a I and a lot of my fellow Bay Area residents are getting in exchange for our long commutes: a home in a community we like better than the one where our employers have put the job sites. In my case, my rent went *down* when I moved to the city. I could now move closer to the office and probably not lose much except intangibles like convenient access to SFO's cultural attractions. I suspect most people would have to sacrifice several hundred square feet of living space and potentially some intangibles like school district performance and higher population density in the immediate vicinity of their homes (which most people hate like the plague).

Still, if they don't like paying for the gasoline they need to burn on the commute to where they can afford to live in the style they enjoy, then well— either 1) save money by cutting back on your lifestyle, or 2) keep the same lifestyle and pay more for it. I'm supposed to have sympathy for people whose main problem is that they find *both* of these mutually exclusive and collectively exhaustive alternatives unacceptable and somehow expect my tax dollars to subsidize them? That's bollux.

[kvenlander]

Arun, there is a process for making synthetic diesel from coal. It was developed by Germany during WWII, and later used by South Africa. The things you do when energy supply is constrained...

The process is not cheap, but produces nice clean diesel. It's being drummed up as a solution in various places (SciAm is where I saw it last).

The environmental effects are bad. Greenhouse gases and toxic sludge from coal in enormous quantities.

[piotr]

Production of synthetic oil is emitting quite a bit of CO2. The first priority should be decreasing the demand.

For example. s9 could decrease his or her gas consumption by ca. 1/3 or more using an Insight. Better public transit and better urban planning should be possible (so one can move closer to the office). Carpooling could be promoted. Hydrocarbons could be eliminated from power production and home heating by alternative sources and commercial vehicles could switch to natural gas. Power saving appliances and fixtures could be promoted better. Better use of railroads could cut on long-distance trucking (say, roll-on roll-off trains going at 50 mph for more urgent cargo). Bullet trains could eliminate the use of airplanes in certain urban corridors.

[bakho]

Al Hubbard of NEC on Bush energy plan:

Q Just to follow up, though, on one element of that point. The President made the point that had ANWR been approved ten years ago, you'd get about a million barrels a day. Had the Iraq production resumed to the level that had been projected before the war, how much would that contribute today?

DIRECTOR HUBBARD: I actually don't know the precise answer to that. What's really most important, though, is that we've become less reliable on overseas sources of crude oil and other sources of energy, and more reliant on energy from within our 50 states [sic].

Q You have no estimate, though, about what Iraqi production could be?

DIRECTOR HUBBARD: I do not have it.

MR. HENNESSEY: We can get back to you.

DIRECTOR HUBBARD: Yes, we can get back to you with that, or --

Q That would be useful. I mean, just -- obviously, since the President has chosen one interesting example in ANWR, the Iraq one would be an interesting one to compare it to, whether that would be more or less than a billion -- a million a day.

DIRECTOR HUBBARD: Yes, we will have to get back to you on that.

[bakho]

It does not matter what the energy problem is. The Bush administration has a single set of solutions. More area open to drilling. Relax environmental standards to enable bad behavior. Keep demand for oil high.

Bush administration is an agenda in search of a problem. This is why they keep giving us the wrong solutions.

[bob mcmanus]

Somebody could maybe start graphing gas prices alongside housing prices. May get interesting in the next few years if this keeps up. Then we can watch the dollar.

[modus potus]

"Bush administration is an agenda in search of a problem. This is why they keep giving us the wrong solutions."

I can't think of a more succinct description of our predicament than this.

[Alan Maude]

All this hand wringing over high gas prices is too much to take. We live in a country that has spent at least the last 30 years treating energy and other natual resources as if they were in infinite supply. It is time for Americans to wake up and begin to realize that the true cost of our dependence on oil is well over 3.00 per gallon. I believe a 2.00 dollar a gallon gas tax coupled with a corresponding reduction in personal income tax would begin to influence personal behaviors. Allegations of price gouging and Lee Raymonds compensation are distractions from the core issues. World demand is up, there is instability in the middle east and parts of South America, our CAFE standards are too low and investment in mass transportation has been inadequate. Some short term pain will go along way towards improving our environment and keeping our dollars out of the hands of the Saudis. Home to most of the 9/11 murderers as is frequently forgotten in the fog of the Iraq War.

[ricardo]

Trotsky suggests that the average motorist is driving 15,000 miles/year in a car that's getting about 30 mpg...

That may be the case, but I would suggest that a more compelling motorist profile is a Bush voter without any savings, commuting about 50 miles one-way 6 days/week from the exurbs (the only place where he can afford to live) in an SUV that gets about 18 mpg/highway. Filling his 20 gallon fuel tank now costs $60, and his gasoline bill alone has gone from about $1667/year in 1998 to $5000/year in 2006...

Remember, this is a Bush voter who's getting sticker shock at the gas pump...no wonder the Repubs are worried.

[Zathras]

Democrats are in favor of higher gas taxes, eh?

Which Democrats might those be? John Kerry, perhaps? Byron Dorgan? Howard Dean? The Sierra Club? Perhaps Brad was just making a reference to those Democrats he knows personally.

[Jim S]

If anyone with the right connections would care to search a bit they'd find an article done a while back by Knight-Ridder newspapers about how the oil companies purposefully shut down refinery capacity to give them an excuse to have prices go up.

[trotsky]

Ricardo,

In 1998, IIRC, oil bottomed out at $10 a barrel and I bought gas in California for $1 a gallon. Those prices, without discounting for inflation, were equal to those of 15 years ago, and the oil companies were frantically merging to stave off financial collapse. I can't expect your average driver to understand that it was obviously an unsustainable situation. Sigh, if only I'd had liquid assets to invest in Exxon at the time.

[RT]

The Dems have tried to raise CAFE standards a number of times in the past 15 years or so, but have always been thwarted by the GOP.

What the Dems should be saying now is that if we'd raised those standards during the '90s, we wouldn't be paying nearly so much for gas now, due to lower demand.

[liberal]

s9 wrote, "Eliminate their 50-mile one-way commutes to work by moving closer to the office."

Hard to do, when zoning regulations and speculative hoarding lead to inefficient land use.

I work at the NIH in Bethesda, MD. Immediately to the north of the main campus, luxury townhomes are being built. While more efficient (people/area) than single family homes, it's still a grotesque waste of resources (that is, as compared to mid- or high-rises).

All that's due to excessively strict zoning regulations.

[Ed]

I find s9's 'let them eat cake' attitude as selfish and problematic as the Bush Administration's attitude which in someways isn't much different.

Solutions that involve increasing mass transit or mass migration into cities or to areas close to work, shouldn't be taken off the table but should be recognized as long term solutions to be pushed politically at both the local and national level. But acknowledging the political component of the situation requires short term policies too that allow for some immediate benefit to outweigh what will be enormous sacrifice for any but the top 10 percent of earners in our society.

There are other reasonable short term solutions that would benefit the majority of citizens and would also be progressive. I don't understand the willingness of some to defend the oil companies. Their profits have little to do with simple supply and demand and have much to do with passing on their profit margins to the consumer. Our 30 year failure in moving away from oil dependence is also in large part due to their lobbying efforts to stymie the demographic and technological changes that would have at least positioned us to have some reasonable control at an individual level when it came to energy choices. We need to wean ourselves from oil, but first our politicians need stop taking money from the oil companies for their personal gain and start taking it from them for the gain of society as a whole.

[Eli Rabett]

Well, I guess Brad DeLong plays an economist on the net. With gas prices and climate and a whole bunch of other things, rate is everything. Given enough time, and good policies, you can adopt to higher gas prices. When the prices go up 0.50-$1,00 in a couple of weeks, it is a different question.

It would benefit us all, and the economy if the US either increased fleet mileage over a number of years or phased in higher gasoline taxes (with a compensating increase in the point at which anyone owes US income taxes for example, or an increase in the standard deduction, or a lot of other economically sensible policies).

What is immensly personally destructive is this sudden spike in prices over a short period without compensating changes.

[Eli Rabett]

Well, I guess Brad DeLong plays an economist on the net. With gas prices and climate and a whole bunch of other things, rate is everything. Given enough time, and good policies, you can adopt to higher gas prices. When the prices go up 0.50-$1,00 in a couple of weeks, it is a different question.

It would benefit us all, and the economy if the US either increased fleet mileage over a number of years or phased in higher gasoline taxes (with a compensating increase in the point at which anyone owes US income taxes for example, or an increase in the standard deduction, or a lot of other economically sensible policies).

What is immensly personally destructive is this sudden spike in prices over a short period without compensating changes.

[Barry]

"Let's say your 15,000-mile-a-year driver is now paying $1,500 instead of $1,000 for 500 gallons of gas (30 mpg -- forget the Hummer owners for a moment). That 500 bucks a year is real money, but it comes in niggling doses of $10 a week. I simply cannot believe that that sum causes a "financial hardship" to 70 percent of residents of the wealthiest country on the planet.

Or are U.S. consumers really stretched that thin? Is that negative savings rate finally kicking us in the backside after a minor (in the scheme of things) oil shock?"

Posted by: trostky |

I just put $40.00 of gas into a Honda Accord. I'd never done that before. It's over $10/week, and I don't drive that far. I used to commute 20 miles each way to/from work. Somebody doing that in a mini-van (because of children) is possibly running $20/week more than in the late 1990's. That's $1,000 more per year.

Given a family income of $45,000 (~median), and a take-home income of $35,000, that's just under 3% of take-home income. For a one-vehicle family.

Add on drastically increased heating costs (IIRC, 50% more this year than last year, 50% more last year than the year before.?), and people are getting squeezed. Meanwhile, media real wages are declining, and the risks of job loss much higher.

[s9]

"I find s9's 'let them eat cake' attitude as selfish and problematic as the Bush Administration's attitude which in someways isn't much different."

Please forgive my apparent selfishness.

In my defense, let me say I don't think my attitude is really "let them eat cake"— since I don't think Americans are [continuing the metaphor] really in a position where they're starving and have no bread. They're actually overfed and voracious, literally burying themselves in their own excrement, and they have the appalling cheek to complain about the price of the "cake" they're stuffing down their pieholes faster than anybody else on the planet— a price, may I add, that people in other well-developed countries find— laughably, ridiculously— low.

[NinjaPlease]

"I seriously considered the Civic Hybrid last time I was car shopping, but ended up with the regular Civic. The regular version is getting 38 MPG for me in real driving. I don't drive a lot of miles, and my back of the envelope calculation indicated that even with $5 gas, it was going to take a bit over ten years to recover the $5,000 difference. Longer if I included discounting of the future savings. I intend to have the car that long, but figure that world-wide demand destruction as crude goes past $80 or $90 per bbl will keep US gas prices below $5/gal. I'm hoping that by the time I have to buy a replacement the technology will be available to do an all-electric Civic."

Don't plan on an all electric car in the near future.

Also, hybrids will need their batteries replaced after probably 4-5 years at probably $4000 a piece, there goes the savings.

I'm an electronics engineer, and if there was an all electric car available for my commute (90 miles per day, 88 of them on the highway,) I would own it already.

Currently available batteries & electromagnetic motors have an extremely inefficent power to weight ratio compared to an internal combustion engine, either diesel or gasoline or ethanol.

We need either:

More energy density out of batteries, and by more I mean like 10x-100x more, or much much much more efficient electromagnetic motors. I doubt that the latter will happen anytime soon for the car buyer market.

Current hybrid technology isn't all that great unless your commute is only in the city, or your business has routes like a mailman, with lots of stop and go driving.

Plug in hybrids that run off of batteries for the first 20 miles are a nice idea, but I don't think they'll catch on.

Diesel electric hybrids are probably the best we could ever hope for---diesels excell at constant speed driving (like on a highway,) while current hybrids operate more efficiently in city driving--the technologies complement each other.

We'll probably see low-sulfur diesel hybrids by 2009--I'd probably buy one of those.

Ideally we'll discover some new battery technology that will allow 1000miles of highway speed between recharges, with solar powered recharging stations everywhere where recharging only takes 5 minutes, tops.

[J Thomas]

my thoughts about gasoline taxes is that we ought to abolish the payroll tax and make up the lost revenue with gasoline and other retail energy consumption taxes.

Why set ourselves up for another crisis? In 20 years or so gasoline taxes aren't going to bring in much revenue.

I like the idea of gasoline taxes with the money somehow redistributed to the people who pay them -- but not in a way that encourages use of gasoline. But if we eliminate payroll taxes aren't we giving most of the money to the people with the highest payroll taxes -- the people on payroll who're hit least hard by the gas tax?

I like your idea in general but there's room for refinement.