The Times' Jad Mouawad has written a piece describing the state of the world's oil market. It is, in a word, tight. Production volumes have been flat at best, and consumption growth has continued. Kevin Drum comments:
I imagine that a global economic slowdown will flatten oil consumption a bit over the next year or two, and eventually higher prices will rein in demand more permanently. On the other hand, we've seen oil prices double three times in the past eight years without producing so much as a blip in rising demand. So if we're in a genuine, long-term supply crunch -- and all the evidence suggests we are -- what price will it take to stabilize demand in its current neighborhood of around 85-90 billion barrels per year? Another doubling? Two doublings? Neither would surprise me. There are too many unknowns to pretend to have any kind of definitive guess, but still, if 2012 were an over/under bet for oil to hit $200, I'd take the under.
Adjustments to high prices will be more substantial over the long-term. Still, while much has been made of reductions in gas purchases in the U.S., the decline in consumption since last year has been a mere 0.2 percent. Demand for gasoline is incredibly inelastic in this country. There is very little Americans can do to reduce use in the short run.
Why is that? As I've mentioned (once or twice) before, the dearth of transit alternatives is one issue. Another, related, factor is the extremely unwise way in which we've invested in homes and automobiles for the last two decades. I've written before on Harvard economist Ed Glaeser's research finding that population has migrated toward low home prices in recent decades, and those home prices are the product of loose land-use regulation. What this has meant, essentially, is extraordinary population growth in exurbs and in southern and western metropolises with development patterns sharply different from those in the older cities of the Midwest and Northeast.
The problem was compounded by the American response to low real gas prices in the '90s and early '00s -- mass purchases of inefficient SUVs. Vehicle purchases are trending smaller and greener now, of course, but the national vehicle fleet takes a long time to roll over. What's more, the households most in need of more efficient automobiles -- those with long commutes in the distant exurbs -- are those most squeezed by high energy and fuel costs and the housing crunch. They don't have much in the way of extra cash lying around.
What does this all mean? Well, for one thing, it spells trouble for many exurban areas. Housing costs, properly understood, encompass both the price of a home and the cost of transportation associated with the home's location. A steady rise in gas costs therefore erodes the value of exurban homes. If we expect fuel costs to continue to rise, then we should likewise expect that value to continue to decline. I'm not able to say to what extent these expectations are built into exurban price declines, but I feel confident the effect is non-negligible (for more on this, see this [PDF] interesting CEO for Cities report by Joe Cortright).
What else? Well, it suggests that from an affordable housing standpoint, we've missed an enormous opportunity. The supply of auto-centric, low-density neighborhoods has grown magnificently in the past decade, while the supply of walkable, dense neighborhoods has expanded at a snail's pace (and slower still has been expansion of the supply of transit-served neighborhoods). Part of this divergence can be laid at the feet of land-use regulation, but not all or most of it. A greenfield suburban development could just as easily be built as a mixed-use, walkable place as a traditional suburb (as demand has shifted we've seen a lot more of the former, demonstrating that it's not an infeasible pipe dream). Instead of connecting distant suburbs to city centers exclusively via new pavement, investments in roads could have been balanced with new money for rail.
Because supply of walkable, transit-served places is so small while demand is so high, those places are expensive. Because they are expensive, they are inhabited mainly by the well-off. Everyone else is forced to make do where they are.
If you happen to think that gas prices will come back down to where they were three or four years ago, or that congestion won't increase as the nation continues to add people, or that the fight against climate change won't necessitate improvements in efficiency and more expensive fossil fuels, well then I suppose you can be excused for thinking that the exurbs will ultimately recover and go right back on growing ever outward.
If you think that those things are probably not going to be accurate descriptions of the future, then there is no avoiding the conclusion that better planning is an absolute necessity. Happily, market demand will buoy shifts in building strategies, but it would be wise to augment market forces. Investments in appropriate infrastructure are vital. Zoning changes are necessary. And a shift in perspective is key. It won't do to have our leaders pretending that something like a summer gas tax holiday will put things right. Those leaders need to be saying that it's time to focus on long-term solutions and long-term adjustments. And those leaders need to be saying that they're ready to put the government to good use in facilitating the transition.
Top 25 reasons to give a damn about climate change
Oil: enough energy to melt glaciers!
Cash for Clunkers brought us ... more clunkers!
Comments
View as Flat
Sephyrave Posted 6:07 pm
29 Apr 2008
What can low-income families do to minimize the effects of oil price rise? Perhaps it's only by not using any automobiles.
http://environe.blogspot.com
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spaceshaper Posted 8:59 pm
29 Apr 2008
I would add that in my area the exurban proliferation has been the result of virtually ABSENT land use regulation out in the county. It's only in town that developers have to deal with any degree of regulation for the public good so they take the easy path. Quite a contrast with other developed countries such as the UK for example, where development outside established conurbations is so tightly controlled as to be next to impossible. At some stage Americans will be compelled to recognize that land, like fuel, and food, is actually a limited resource.
But when?
The true meaning of life is to plant trees, under whose shade you do not expect to sit.
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Delay And Deny Posted 12:51 am
30 Apr 2008
Say an exurbian commutes 50 miles a day each way.
His car gets 24mpg city, 30mpg highway.
Let's use an average 25mpg for this analysis.
Let's price gas at $4 a gallon, he uses 4 gallons a day so he spends $16 a day on gas.
In a week he spends $80 a week or $4,160 a year on gas.
Basically it's about the cost of a car payment and still hardly "lifestyle threatening".
In fact, he would be better served if he could keep his 25mpg vehicle and not have to pay the billions in "transit taxes" that the centralized governments of the old urban centers are trying to impose on him.
Texeme.Construct(Participant)
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Jon Rynn Posted 1:40 am
30 Apr 2008
At least Obama is not pandering about an 18 cent tax holiday. I'm a little surprised at Hillary, she went to the global warming candidates "debate", she should know better.
Bailo, when gas gets to $8 gallon, you're exurbanite is spending, according to your calculations, over $640 just for commuting -- never mind shopping or visiting friends. The suburbs (and exurbs) were originally set up for the rich, that is probably how it will end up in the future.
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Ryan Avent Posted 2:42 am
30 Apr 2008
Billions in transit taxes? Really? You'd think that transit spending wasn't a tiny fraction of spending on highways. What's more, the self-satisfied exurban commuter is enjoying some nice benefits thanks to transit. In Washington, for example, Metro handles around 750,000 trips a day. Local buses carry another 500,000 people, and commuter rail accounts for thousands more. How would our friend the driver find his commute if those trips were instead made in single-occupancy vehicles?
And there are also accident and pollution externalities to consider. Research on the subject has suggested, in fact, that once all costs are taken into account, transit subsidies are actually lower than they should be. One has to take an extremely narrow--and incorrect--view of cost and benefit to find that exurban living and long commutes are anything close to economically efficient, or sustainable.
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Bart Anderson Posted 6:05 am
30 Apr 2008
Even though US infrastructure stinks, for the reasons you mention, there are many things individuals can do to shield themselves from the hit.
All of these are familiar to people who lived through the 70s oil crisis: Reduce the speed limit to 55 mph. Because air resistance increases with the cube of the speed, mileage drops precipitously at high speeds. Drive with fuel economy in mind (avoiding stops/starts, keeping tires inflated, removing unused loads from vehicle) Bikes and walking - auto mileage is terrible on short tripsMass transit and car pooling. Consolidating errrands Eliminating optional car trips It's amazing how creative people can be when they're motivated.
Bart
Energy Bulletin
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blutown Posted 6:56 am
30 Apr 2008
I don't particularly like the UK idea mentioned when correct pricing alone could fix the problem. Cheers!
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GonzoDon Posted 7:40 am
30 Apr 2008
For a wonderful analysis of how our auto-friendly zoning and land-use policies have helped aggravate our oil dependency -- not to mention created a lot of butt-ugly, spiritually-degrading, utilitarian architecture and sprawl that treats public space as if it's a disposable commodity we want to drive past as quickly as possible -- read J.H. Kunstler's excellent book "The Geography of Nowhere".
An interesting point raised by Kunstler (and others I have read) is that "affordable housing" in the United States used to be abundant. It consisted of walk-up apartments on the second floor above hardware stores and five-and-dimes, and outbuildings located along alleyways behind the homes of relatively wealthy people. While not the most desirable housing in the world, it allowed poorer folk to live in the same neighborhoods as middle- and upper-income people, to access the same transit options, to be hired by them without having to commute 45 minutes each way from distant poor neighborhoods, and to expose themselves and their kids to a lifestyle to which they might choose to aspire.
Contrast that to today's remotely-located, economically-segregated, cheap-looking "affordable houseing neighborhoods."
There are very few communities left in the U.S. where zoning codes would even allow for the old-style kind of "affordable housing".
The older I get, the more I am convinced that things as mundane as zoning and land-use planning can make a world of difference.
It is not an accident that millions of Americans each year will spend thousands of dollars to flee their ugly exurban neighborhoods simply to enjoy a few days in DisneyWorld's cartoon representation of old-style walkable, mixed-use neighborhoods ("Main Street") and/or in living examples of such neighborhoods today (Provincetown, Mass; Portland, Oregon; Savannah, Georgia; just about any small town in France).
It never seems to occur to them they could work to build similar living communities at home.
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Jon Rynn Posted 7:54 am
30 Apr 2008
So it might be a good idea, when extolling the virtues of walkable communities, to bring up the image of Disney Land.
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Biodiversivist Posted 2:54 pm
01 May 2008
In the end, it all comes down to biodiversity. Poison Darts--Protecting the biodiversity of our world
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