With
real gasoline prices approaching all time highs, an accumulation of technocratic follies interacts in predictable ways. Start with Slate's Henry Grabar asking readers, "
Is Your Car Too Big?" Let us be grateful what he offers is relatively straightforward, without the
sissy aesthetics and
pickup truck shaming that often accompanies such editorializing.
It hasn’t been that long. The last time we had a run of high gas prices was from 2011 to 2014. True, prices then maxed out at just under $4 a gallon. But adjusted against wages or inflation, prices felt even higher then. It was a major issue in the 2012 presidential campaign. We adapted—by fracking the hell out of the Great Plains and becoming the world’s top oil producer — and the issue was basically forgotten.
Until now. Spurred by post-pandemic demand and Russia’s invasion of Ukraine, oil prices have gone vertical. Some Democrats want a gas tax holiday; Joe Biden has blamed oil companies for not taking him up on the permits he’s offered, and drilling; Republicans say environmental policy is at fault. Some economists think Congress needs to offer financial guarantees to the fracking industry.
Obviously, everyone and their mother is mad, mad, mad about the high price of gas, in part because Americans now are back to driving just about as much as they did before the pandemic. We’re not going to the office, but we’re not staying home. From Virginia to Colorado, drivers are liable to pull up to the pump and be greeted with a sticker of Joe Biden, pointing at their total: “I DID THAT!”
Because he did, and his administration is
still of two minds on the rising fuel prices. Some members appear to be willing to let the price increases induce the kinds of substitutions price increases, particularly permanent price increases, do, and some want to soften the blow to people who made decisions based on price levels that were more or less customary apart from disruptions of the oil supply driven by world events. (I'd be more inclined to
view price increases as permanent if I saw something like the
Hotelling pricing principle for exhaustible resources at work.) Because it's not, consumers keep responding to gasoline prices differently as they rise when some world event gets in the way and fall when the background noise becomes manageable.
A look back at 2011 suggests an interesting counterfactual: What if, facing those high prices, we had made changes on the demand side instead? Believe it or not, this was what some people thought might happen. President Barack Obama took that moment (and the conditions created by the auto bailout) to set new Corporate Average Fuel Economy standards, known as CAFE, which put in place ambitious fuel efficiency goals for automakers. “Slowly but surely Detroit is shifting its attention from SUVs to cars,” All Things Considered reported in March of that year.
Yes,
we've seen that dynamic before, as well as the difficulty of a one-size-fits-all fuel efficiency standard. Mr Grabar will get back to us on some of that. First, though, he raises yet another tradeoff.
Another artifact of that heady time not so long ago was the widespread sense that the American city was reclaiming its long-lost allure, prompted by a combination of those high gas prices, low crime rates, and generational change. In an emblematic column in the Harvard Business Review, “Celebrating $4 Gas,” the economist Matthew Kahn wrote that “some people (especially the young, older households, and those who work in the center cities) will increasingly live an urban life, occupying high density apartment buildings close to public transit and walking to stores.”
Of course, Americans did not wind up driving smaller cars, taking more public transit, living in smaller homes, or inhabiting more walkable places. In fact, we did exactly the opposite.
Had any of those things come to pass, we’d be much better positioned to weather sticker shock at the pump. It’s only going to get worse come summer, as road trip season arrives and pricier “summer blends” arrive from refineries. (Yeah, there’s a winter blend and a summer blend of gasoline, adjusted to evaporate at different temperatures.)
We have the environmental lobby to thank for that
seasonal blending of fuels, and there are predictable higher prices this time of year as the refiners stop refining the winter stuff and the dealers attempt to stretch out their stocks of it so as to sell the last of it out just ahead of the day it must be off the market. The allure of thickly settled areas
isn't at great if there is a contagious disease about, particularly a contagious disease that the professional managerial classes attempted to depict as really scary. In addition, higher transportation costs lead to
steeper rent gradients, pricing some of the people who might want to live in the cities further from the city centers.