Saturday, April 22, 2006

Gasoline remains a great value 

There are times when I enjoy Bill O'Reilly, and times when I can't take him anymore. Last night was one of the latter.

O'Reilly has been on a tear about gasoline prices, blowing a lot of populist mouth flatulance about how they are high because the oil companies have manipulated them. He has accused the oil industry of the crime of price-fixing without the slightest shred of evidence. There is so much that is asinine in O'Reilly's accusation that I'm not going to dignify it with a response. The interesting question is, why does O'Reilly think he can make hay complaining about gasoline prices?

People are evidently outraged over "high" gasoline prices -- otherwise television personalities like O'Reilly and out-of-office politicians wouldn't be beating the tom-toms about them. Who has not seen the tedious local news programs with stories about people pawning their heirlooms to buy gasoline? But isn't this all so much idiocy? My assertion is this: however "high" gasoline prices may be by historical standards, gasoline remains a fantastic value. If it weren't, then people would take obvious and simple steps to curtail their gasoline consumption. They don't, because even at $3 per gallon they would rather burn gas than bear some other burden. Gas is so cheap that most Americans won't do anything to conserve it.

Now, I'm not talking about lifestyle altering steps like turning in the SUV for a Toyota Corolla, or riding a bicycle, or -- Allah forfend -- walking. Nor am I suggesting that we should in any way, shape or form deny our children their every transportation requirement, even though "in my day" we would have travelled through quiet college town streets on our own power. And I'm certainly not talking about anything so radical as permitting businesses to operate near housing developments. God forbid we should be able to walk down the road for a quart of milk and a pound of hamburger.

No, I'm talking about easy stuff. Like driving more slowly. I drive on New Jersey's highways. I have always driven at about the 70th percentile, passing roughly twice as many cars as pass me. I see no evidence that anybody is slowing down to save gasoline, even though many (but not all) cars consume significantly less fuel at lower speeds. Everybody knows this. American drivers don't slow down, because gasoline remains such a good value that they would rather burn more of it to get where they are going faster than save a few dollars at the cost of more windshield time. Gas may be more expensive than it was, but even at current prices people are willing to trade it for less travel time.

It isn't just speed. Americans don't turn off their engines at long stop lights. They did that during the oil price shocks of the 1970s, and drivers still do it in countries where gasoline prices are much higher than they are in the United States. Americans don't do it, though, and didn't even during the Katrina shock in September. Why? Because they would rather burn gasoline than turn off their radio, air conditioner, and DVD entertainment system. Gasoline is still such a good value, we would rather consume it than turn our cars off and on, even at four-minute stop lights.

But wait, there's more. Like many Americans, I work in a suburban corporate office park along with hundreds of other people who travel great distances every day. While many of our employees are scattered, most live pretty near at least one other person, or along the same route to the office. I don't know of a single pair of employees who share their ride to work in order to save money. Do you? Until we see workers spontaneously organizing carpools, we can safely conclude that gasoline remains such a good value that people will not bear even the slightest inconvenience in order to use less of it.

Now, I don't doubt that there are some people who live in rural areas and have to drive great distances to do anything, or whose incomes are so low that they can barely afford to run their automobiles at $2 a gallon. But most Americans don't live in rural areas -- they can, in fact, take public transportation to work, or ride bicycles, or share a ride with their neighbor, or walk more. Indeed, it is a strange circumstance of American residential life that the poorer people in the shabbier housing live closer to businesses where they might work or buy necessities than more affluent people who can choose where they live.

The ugly truth is, the whining about high gasoline prices is just that: whining. It reflects poorly on the American character, insofar as our massive appetite for petroleum comes at a very high cost that is not reflected in the price at the pump. Is there any doubt that most middle class suburban families could cut their gasoline consumption by 10%-20% by making the tiniest adjustments in their habits and bearing the slightest of inconveniences? They don't, because gasoline remains such a great value -- a gallon of it still costs less than the same amount of milk, Coca-Cola, or bottled water pumped out of some spring in the woods, and none of those will carry you and your possessions 25 miles at high speed -- that people will not change one iota in order to save a drop of it. I know I haven't. But I also know that it is absurd to complain that gasoline has recently become a slightly less outstanding bargain. Moreover, it is downright unseemly for politicians and self-proclaimed bloviators to pander to those complaints by accusing the people who do the dangerous work of pumping, transporting and refining oil of being criminals.


By Anonymous Anonymous, at Sat Apr 22, 05:48:00 PM:

Not to mention that even at $3.00/gal., gas is still cheaper than it has ever been when compared to the cost of living.  

By Blogger Admin, at Sat Apr 22, 06:06:00 PM:

where i agree with you about the absolute necessity of americans changing the way they consume energy, specifically gasoline, and furthermore, i also concur that o'reilly is an asshat, i still think a congressional investigation in the pricing of gasoline is in order.

if the "we are a nation at war" is gonna be used repeatedly to justify everything, then perhaps the oil companies should shed a little of the record breaking per quarter/yearly profits they have made since the war has begun.

god forbid we attack iran and have $5.00 gasoline, i don't think our economy can take the inflationary hit.  

By Blogger Lanky_Bastard, at Sat Apr 22, 06:43:00 PM:

I know people who carpool to save money. But they're service workers, not office workers.  

By Blogger The Leading Wedge, at Sat Apr 22, 07:39:00 PM:

A few facts from Norway to put things into perspective. Norway is a tiny country (about 4 million inhabitants) with a lot of oil (at one point the 2nd largest exporter of oil in the world. I believe it is number 3 now behind Saudi Arabia and Russia - it is at least in the top 5). The government taxes oil revenues heavily and salts the money away rather than letting us citizens and residents get our greedy hands on it. At the the end of 2005, the state oil fund had about NOK 1,450,000,000,000 which is roughly $220 billion. Divided by the population, each citizen has about $50,000 "in the bank". Since Norway is a small country almost devoid of corruption, we trust that the money will benefit us or our progeny - i.e. the money is about as safe as if we had had it in the bank. My family has four members, so we have about $200,000 "in the bank". Due to the all the Iran trouble and increased oil demand thanks to robust economic growth, India, and China, the fund has increased dramatically since the end of 2005. Norway is filthy rich thanks to nature and the oil market.

Gasoline costs about $6.50 per gallon in Norway based on today's exchange rate. Everyone complains a bit (keeping in mind that high oil prices are good for us), but the economy works excpetionally well and no one really suffers. No one changes their habits or their plans because of the price of gasoline. Reasearch has been done on the subject and it was estimated that it would take a price of $9/gallon before people would consider changing their habits. The research is old, so I suspect the current figure is more like $11-12/gallon.

You're right. Gas is cheap.

Disclaimer - I am an American citizen who has lived in Norway many years. I believe, and have always believed, that Americans are whiners when it comes to the price of gasoline.  

By Blogger Unknown, at Sun Apr 23, 11:53:00 AM:

It seems to me that there are a few structural decisions that would make a difference, too. For example living closer to where you work or shop. It's not a law of physics that you must live 20 miles from the freaking shopping center.  

By Blogger Dawnfire82, at Sun Apr 23, 12:02:00 PM:

You're right, but remember one point. The US is a huge country and in most places lacks a robust public transportation network. Virtually every family owns 1-2 cars. We drive everywhere. We have to, there usually are not enough buses or (any) subways or (hah) trains to ride instead. And forget walking or riding a bicycle; my commute is the long side of 15 miles and my day already starts at 4 am.

My wife and I don't make long trips, or visit San Francisco on the weekends, or go to the beach that many people do on top of regular tasks. We go to work, come home, and buy necessities. And we still pay about $90 a week in gas at current prices. We don't have a choice; we pay it or we don't work. It is a literal dependence.

Maybe I just don't get paid enough to fall into the majority, but I won't be taking any long trips any time soon, primarily because of the cost of gas. Does that count as changing my habits?

Interesting analogy just popped into my head. What if you were charged to breathe? That is, you had to pay for the cost of the oxygen that you used to live. Say it's normally like, .05 cents per breath. No big deal, about $7 dollars a day, more if you work out. Small price to pay for living, right? But what if a big fire, Wildfire Katrina, hit and used up or polluted a lot of the oxygen? What if it went up to .2? Not that big of an increase in raw terms, but 4 times larger. Now it costs almost $30 a day to live. What if your job requires you to exercise or work hard physically or yell and adds extra breaths per day? I'd bitch.  

By Anonymous Anonymous, at Sun Apr 23, 12:16:00 PM:

According to an article that appeared in my local newspaper recently, If you add up the cost of the number of shots necessary to make a gallon of espresso at Starbucks, you would pay about $40.  

By Blogger Counter Trey, at Sun Apr 23, 12:35:00 PM:

Only slightly off topic:

I can't stand it when I hear people--mostly on the left--say that O'Reilly is politically conservative. He is just another opportunistic journalist looking to sell ad time. He'd call for Nancy Reagan to reimburse the cost of Ron's state funeral if he thought it would bring in viewers.  

By Anonymous Anonymous, at Sun Apr 23, 02:46:00 PM:

Until the price alters people's "driving style" (i.e. they quit driving like freaking maniacs), I am forced to conclude the price isn't "too high".  

By Anonymous Anonymous, at Sun Apr 23, 04:36:00 PM:

According the sfgate article you link to, driving at 55 mph saves about 30 cents at the cost of an extra 3 1/2 minutes on the road. That works out to $5.14 an hour. For me, it makes no sense to drive at 55. The cost savings would have to be eight times that ($2.50 for those 3 1/2 minutes) to break even.  

By Blogger Gordon Smith, at Sun Apr 23, 05:46:00 PM:

I'm very excited about rising gas prices. Without some free market economics in the picture, we're never going to move away from oil dependence. Gas prices, with the Republicans' willingness to subsidize the most profitable industry in the world, have been too low for too long.

I look forward in ten years to seeing all the conservatives driving hybrids, using biodiesel, propane, or methane. For a long time, lefties who proposed alternative energies for a stronger, more diverse economy were scoffed at. And now I know I'll one day have the pleasure of seeing the right-wingin'est of any of you adhering to what liberals have been telling you for years:

Alternative energy just makes sense. Diversifying our energy sources is simple wisdom. Welcome to the club, right wing world. I hope you like the cleaner air, lower prices, and increased independence that comes with moving towards a sustainable future.


By Anonymous Anonymous, at Sun Apr 23, 11:26:00 PM:

You just might want to wait 10 years before going to an alternative fuel source. Wasn't it a Toyota big-wig who, when asked how long the batteries would last in one of their new hybrids, said something like "Probably as long as the average buyer will keep the car." Yeah, like the guy next door who has a 13-yr old sedan and a 15-yr old truck? And check what a new set of batteries will cost. And when the next cycle of "new technology" replaces the old... How's your 10-yr old computer stack up to a new one? This conservative (who thinks O'R hasn't a clue about the oil/gas industry) has 2 smaller cars - and one SUV. Tigerhawk, we're hitting the road - in the SUV - later this week; from Colorado to the mid-west (for visits) to Yardley, PA, then the Jersey shore. Anyplace we can stop and buy you a Dr. Pepper? OldeForce  

By Blogger ScurvyOaks, at Mon Apr 24, 11:33:00 AM:

Screwy, this is one of the rare occasions when I agree with almost everything in your comment. In similar fashion, I am already enjoying seeing a number of pious liberals change their minds on nuclear energy. We can gloat together. :)  

By Anonymous Anonymous, at Sat Apr 29, 02:52:00 AM:

The anonymous blogger above "looks forward in ten years to seeing all the conservatives driving hybrids, using biodiesel, propane, or methane."

Just who do you think currently uses the most biodiesel and propane? Farmers and others in rural areas, i.e., not exactly a bunch of liberal moonbats.

We scoff at "lefties who proposed alternative energies" because they offer no alternatives, just complaints and tax increases. Now they're whining about the high cost of gas (and given the chance would hike gas taxes even further).

Everyone spouts off about "alternative energy" without identifying what sort of alternative they're recommending. The lefties certainly don't want to advocate nuclear, and they'd be the first to decry a windmill farm or hydro-electric dam in their backyard.

The simple truth is that there still is no alternative fuel that can replace the value and convenience of petrolium. Ethanol requires more energy to produce than is saved by using it over petrolium. Hybrid motors require batteries constructed from heavy metals and other toxic materials that someone will have to deal with in the future (and pay to replace). Nevermind that the USA gets over 50% of its electricity from coal, which when burned releases far more CO2 than gasoline does.

And finally, a gallon of milk costs about $3, orange juice $6, etc. Get a grip.


By Anonymous Anonymous, at Sun Sep 24, 05:51:00 AM:

An obvious solution to our problem that would (a) conserve resources, (b) protect the environment, and (c) save consumers a lot of money, is simply to drive less.

The problem, of course, is that people will not drive less of their own free will, because people, bless their souls, do not act in a manner that benefits the common good (resource conservation & environment protection) nor do they have the discipline to resist the urge to drive even when it would save THEM money. Adults, in so many ways, are like children, demanding, selfish, and slaves to their habits.

The obvious and relatively simple solution is to force people to buy less gasoline. Rationing gasoline would be the way to do this. It would force people to take bicycles, to use public transportation, to car pool. You could radically cut the consumption of gasoline, and it would be totally egalitarian (while raising prices only means that people who are economically less well off would drive less while the richer folks could continue to abuse resources and the environment).

This is such a perfect idea. The only "losers" would be the oil companies and their investors.

What on earth is wrong with this idea?  

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