Todays German gas price: $9,008 per us-gallon…

Any questions?

No doubt that has something to do with the price of gas there. I know when I was there it was always a carefully thought out decision as to whether we would drive. It was usually reserved only for locations where public transit was infrequent or unavailable.

Just so everyone’s clear, in the German system the comma functions like the period does here. So he’s not saying that Germans spend 9 thousand dollars per gallon of gas; he’s saying they pay 9 dollars.

That would be bad…

I miss those condemnations. They were fun. Bubba, great defender of W, where are you? Is that you I see in that CIVIC?

Some of the current reduced demand for highway fuels stems from a general economic slow-down. Other goods and services are being squeezed, and profit margins and workers in those other sectors are getting squeezed. Consumer demand and investment spending are declining–that’s a recession. The last time we had energy prices this high–early 1980s–we had the worst recession since WWII.

Another effect of high energy prices is inflationary pressures–in the early 1980s we had stagnation and inflation at the same time. It was a terrible time for most Americans (but not for me because I was working to develop oil shale).

To import high-priced oil, we are now “exporting” each year approximately 1% of aggregate US household wealth (per Federal Reserve Board triennial survey). This pretty well neutralizes any potential for household wealth to grow and exacerbates the declining circumstances of the Middle Class. We are burning the furniture to keep the house warm.

High oil prices empower nations it’s not useful to make powerful, including Russia, Iran, Venezuela, and the ruling families of other OPEC nations. Typically, the “oil curse” or “Dutch Disease” means that income inequality and political instability rise in oil exporting nations. This distorts what could otherwise be better foreign relations and military policies for the US.

Joe mentions one of the uncertainties we cannot avoid if we rely on price to limit energy consumption–prices tend to fluctuate and as they do consumers’ decisions will change. I would mention another uncertainty–we don’t know what price levels will produce which consumption levels in the US. Will a $2/gal. tax on gasoline drive consumption down by 2MM BPD in 5 years, or would it take a $4 tax to get that result? Can we muster the polical will to increase a “tax” rate if environmental/energy policy demands that? For both reasons, when we try to affect behavior indirectly by manipulating the market, we know the cost but we can’t predict the result.

What we have found to work in the 1970s and 1980s is mandatory efficiency standards like CAFE and building and appliance standards. They work even when price isn’t working (oil was cheap for 17 years after 1986), the results are highly predicable, the costs are predicable enough, and the drag on the economy is much less. Creating mandatory markets for clean fuels is a part of that approach, e.g., mandatory utility purchases of co-generated power at avoided costs in the 1970s and 1980s and RFS now.

If these measures don’t do everything that needs doing and we have to throw some money selectively at the supply of clean energy, it will cost society a great deal less to do that with subsidies than to make a policy commitment to stable high across-the-board energy prices.

Joe, you seem to be going in a different direction, but I don’t know why. Anyway, I appreciate the space to make my points–that price is the problem, not the solution, and that command and control are not 4-letter words.

However.

My back-of-the-envelope calculations are that if Americans started to drive as much as Europeans (lets assume $9 a gallon gas prices) we’d might see a reduction in demand of 1.5 billion barrels of oil. That is something like 40% of the all the oil imported into the US.

That would require an “average” Americans to drive 9K miles a year, instead of 11K.

I don’t think the “average” American could really afford to cut their miles down so far. At some point you are really cutting into commute times. In addition, at $9 a dollar gas the inflation effects would be destructive as well - between food and gas the consumer economy would disappear.

But I’m not sure from a carbon standpoint $9/gallon gas would do much.

CAFE is fine. But it is distorting (the exemption for trucks), tends to put American companies out of business (for their own inability to make small cars), and I don’t see it making much a difference going forward (i.e. it is good to move from 10 to 20, harder to move from 20 to 30)

I don’t think the “average” American could really afford to cut their miles down so far.”

If the “average” American would car pool one day a week he or she could cut their commuting gas by 20%.

Just let one other person ride with them a single day a week and then be willing to ride shotgun one day.

Carpooling with all four seats full. That would mean….

Clever system, social order, rules, etc.

The point: folks can, do, will adapt.

Best,

D

Notice the slight leveling off of miles traveled during the 1991 and 2001 recessions–per the FHWA data. Also, CAFE standards for light trucks were going up again as of 2004. Both of those add to the price effect, which I agree is real. I don’t think there is any way to know what the short-term and medium-term gasoline price-demand elasticity functions are. Why bet the planet that you do know that?

“Let’s not forget that reduced consumption is only one of the effects of high energy prices. ”

This statement is back to front. High energy prices are a product of high demand and limited supply. Your statement only has relevance in a segment of the global economy and shows that you are not thinking about climate change (the subject of this blog) but about the fate of the US economy.

The FHWA data, I’m sure we can both agree, is flawed in many ways. Yes, I agree engines are more efficient and cars are too heavy. But if we go back to 1987 size cars — with their attendant safety risks — we’ll just be going from 20 to maybe 27 MPG averages. The CAFE numbers are also somewhat imaginary — not based on how you use the car.

And Bob, yes. One day a week car pooling would greatly reduce the number o miles being driven by CARS that COMMUTE. However, there are 240 millions cars in the US, and they are not all being used for commuting. And that 11K mileage figure is also an imaginary average. The miles are also being used for shopping and other transport. My hypothesis is that even if you forced every single American to share a car to work, you would barely get to UK levels of miles being used. Too much of our transport is NON-JOB-COMMUNTING, and we need other solutions to get those miles down.

How many kids are driven to school with only one or two kids and one parent in the car? All those empty seats.

How many of us run errands more than once per week? Personally I go to town once and week and am now cutting back to twice a month. Run gas up to $10 a gallon and I’ll go once a month.

How many of us go out to dinner or to the movies with only two people in the car? Need I go on?

I well remember the gas crunch of a few decades back. People got creative. Some people slept in their offices one or more nights per week. Some people stayed at friend’s or co-workers houses one or more nights per week. I know people who drove their RV to the city and slept in it a few nights a week.

Then there are other creative ways to save gas. We don’t really need to go shopping as much as we need stuff that’s in stores to get to our houses. Perfect for online ordering and regularly scheduled delivery service. SuperStore drops off your groceries, prescriptions, and new bloomers.

We’ve got a company delivering food from multiple restaurants in our area now. No reason that every restaurant need run a separate car to drop of pizzas and Chinese.

There’s a lot of elasticity in our transportation system. We can even walk, ride a bike, or take the bus part of the time.

And then there are the PHEVs/BEVs coming on the market now and in the next year or so. Those move us off the petroleum teat and onto off-peak electricity, with which we are amply supplied.

Very few of us are screwed. We just need to think about different ways to do the same old things.

Average car in Virginia (which is a pretty typical US state) goes 17K miles a year. So moving to a UK model (9K) would be more like a 50% cut.

There is no question that it CAN be done. The Juneau example is proof of that.

But in the nearfield (5 years) that cut is going be extremely painful, and EXPENSIVE. Expensive in the sense that shopping, vacations, and all those other little things gets cut. It would be like being back in WW2 consumer rationing.

In the longterm, yes, we would adapt. After all Europe survives quite nicely on $9 gas and lower miles being driven. But, as countless people have pointed out, they did have 25 to adapt.

That sort of rationing would eviscerate the current US and world economies. Such a downturn, would in turn, reduce world wide demand for oil. And the price would fall….

The question is how to create a soft landing. The more present question is how to stabilize and reduce the number of miles being driven. Gas taxes are not going to work in this climate. Asking everyone to car-share is not going to work. CAFE is not going to work either. Joe’s move to plug-in hybrids DOES work, but not in the next 5 years.