Rebuilding Place in the Urban Space

"A community’s physical form, rather than its land uses, is its most intrinsic and enduring characteristic." [Katz, EPA] This blog focuses on place and placemaking and all that makes it work--historic preservation, urban design, transportation, asset-based community development, arts & cultural development, commercial district revitalization, tourism & destination development, and quality of life advocacy--along with doses of civic engagement and good governance watchdogging.

Wednesday, June 03, 2015

Reduction of gas prices as a lost opportunity to increase federal gas taxes "significantly"

It is predicted that because of worldwide recession, significantly increased supplies, and Saudi Arabia's continued sale of large amounts of oil despite low prices (but also because a byproduct collected from oil production is natural gas, which is used to generate electricity and for heating and this requires a minimum production of 8 million barrels/day) as a strategy to retain market share, gasoline prices will remain low for a long time.

-- "Prices Are Down, but Saudis Keep Oil Flowing," New York Times
-- "Petro States of America," Businessweek

Image from InvestmentMine.

Now the price for oil is around $60/barrel, which is not quite half the cost compared to the same time last year.

In Europe, gas prices are very high because of massive excise taxes.  The funds don't necessarily fund only transportation.

For example, the price of gasoline is almost $10/gallon in Norway--even though the country is a large producer of oil--and the revenues help fund the nation's social programs.  In other European countries, the price per gallon ranges from about $5.50 to $8.00.

High gasoline prices discourage car use, encourage use of sustainable transportation, especially transit, and the use of electric vehicles--e.g., when a gallon of gas costs close to $8, electricity-fueled cars and especially trucks, despite the high cost of batteries, are still a cost effective choice.

The federal gasoline tax is about 18 cents per gallon and has been the same price for more than 20 years.

The Federal Highway Trust Fund is supposed to be generated solely by the gasoline tax.  The budget is about $45 Billion, but revenues from the gas tax are short by at least $10 Billion.

-- Highway Trust Fund projections, Congressional Budget Office

Between inflation and increased costs of maintaining aging infrastructure, the expenditures should be increased to at least $60 Billion total.

-- $2.756/gallon  Today's average gas price, AAA
-- $3.65/gallon, average price, Memorial Day, 2014, AAA
-- "Gas Prices Have Probably Peaked for the Year," Time Magazine

Doubling the federal gas tax, and indexing it to inflation to address future needs, maybe with an additional inflator based on a projection of ongoing increased demands for maintaining aging infrastructure would be "economically easy" now, given that gas prices look to stay comparatively for a few years.

... yes, circumstances can and will change.  In the meantime, the roads aren't fixing themselves.

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At 4:27 PM, Anonymous charlie said...

at the risk of being too general again (and I didn't even get to pick on your peace corps biking pants)

1. Everyone expected a "gas dividend" to come along this year as people took the extra money and spent it elsewhere.

2. The dividend hasn't appeared.

3. No question that short term prices on hybrids are declining and SUV/CUV sales are going up. (Less a signal for gas prices than it used to be)

4. I agree with you that gas taxes should bring it to the 4 to 5 dollar range BUT using that money in a highway fund is dangerous. Money creates pressure and weight to spend. But it in a general fund

5. Oil prices took a big dip (Brent) but actually gasoline prices didn't drop quite as much. It the old WTI/Brent Spread. Personally I think that was #1 at work, except for a trip to Chicago I don't feel gas is "cheap" just less pricey.

Now to be general -- I like $5 gas, but I do think it was pretty big repression on the rest of the country.

At 9:35 PM, Blogger Richard Layman said...

I think gas should be priced more highly to reflect the reality of all the externalities. But it should be phased in.

Of course, it won't happen. But... I was at a conference of smart growth oriented developers. And thinking of your comment over the course of the afternoon, I was thinking about what high priced gas would have done in terms of reshaping the land use, and concomitantly the development and financing regime.

We'd have a lot more multiunit housing, more density, more transit, and shorter distances.

We'd be spending a lot less money on Mideast oil, on the military, on certain kinds of infrastrucdture (if we were spending money on such), etc.

2. wrt your point about what to spend the money on, I agree with you that the "tax" should not only fund transportation, or "roads" just as I say we should have "transportation management districts" not "Parking districts" although I have no problem with a forced commitment for full funding of the trust fund + a transit fund.

3. wrt "the dividend" from lower prices, I think that the 2008 crash had a kind of behavioral impact on spending for a lot of people who experienced job loss and other dislocation. So they are spending less generally, more focused on needs, and cutting back.

... that difference between wealth and income.

fwiw, the reason that I buy thrift shop clothes, shop the circulars and ethnic groceries for less expensive food, etc., is because of the economic dislocation in my family after my father died in 1967. It was my own economic depression.

I have to be careful to not overextend this thesis, but I think that's what's going on.

The people who are car dependent and make less money are probably more on the edge economically and therefore more akin to "saving" the savings in order to feel a little bit less on the edge.

And because there is no question that $5 gasoline would cause great difficulties, even though it is necessary, I'd say that such a rise should be phased in over a long period of time.

At 9:40 PM, Blogger Richard Layman said...

... the reason it's so hard to support urbanism, transit, biking, density, revitalization, etc., is because most of our big policies are incongruent with those kinds of outcomes.

I mean, given that gas is more than $8/gallon in the Netherlands, there is an excise tax on new cars equal to the cost of the car, parking is expensive, parking permits in cities are very difficult to get, it's expensive and difficult to get a drivers license, and the state invests in sustainable mobility, the development pipeline is primed to support sustainable mobility over car dependence.

Here, the policies that support smart growth are more like band aids on the top of policies that are for the most part oppositional to smart growth.

It's no wonder it's such a struggle to get the "right" land use and mobility outcomes.

At 6:50 AM, Anonymous charlie said...

RE: Gas dividend.

Yes, I suspect you are correct -- 2008 was a huge kick the gut to most Americans, and changed behavior.

Also, higher oil prices encourage jobs+growth. Not quite the same as $5 gas based on taxes but close. We've had this argument before, where I pointed to Canada as what can happen to urban areas in a $5 gas.

Your thift store store raises some important questions too: the economic value of a city. On one hand, as you've said before, the city is the sustainable lifestyle. On the other, city life is always going to be more expensive.

In a fiat money world, where money is an IOU, there isn't as much inherent value in a city/transaction model. When money=land, tremendous value in high value land. YOu can only buy Park Avenue once.

( I sometime accuse GGW of being stuck in SimCity, and maybe I am just stuck in Monopoly)

But in a transaction city model, the goal needs to be to get you out and explore new stores and pay $150 for a new set of fine biking pants.

(With a chainguard, my $500 pants do fine on a bike, but I do remember I am not allowed to work on my car with them. Expensive lesson! Snark off)

No easy answers here, just a reminder than Lewis Mumford and Uber are both extremely anti-urban.

At 7:46 AM, Anonymous charlie said...

also this:

At 8:46 AM, Blogger Richard Layman said...

the second one first... this is sort of like uber for thrift stores. I am not saying that making over thrift stores is bad and I think it's great, but uber is for young people who believe taxis are "common," so they want a service that treats them specially.

While thrift stores clearly need better marketing and merchandising, these kinds of redesigns are for people who shop at H&M, not the kind of people who shop normally at Family Dollar or Walmart.

(On another note I have been thinking about the ability of nonprofits, like Housing Works or Homeboy Industries in LA, to do retail and restaurants as "social entrepreneurship" and retail development in places where retail options are otherwise limited.)

At 8:56 AM, Blogger Richard Layman said...

the thing about the city and costs and spending is that it is bimodal. You can support both expensive lifestyles and lower priced ones, excepting housing.

e.g., in NYC, you can find cheap stuff and food (probably not as much now). It's just housing is uniformly expensive, regardless of its place on the location and quality ladder.

That comes from volume of population too, not just "density."

But also reasonably priced transit. A monthly transit pass in NYC is something like $125/mo. Plus it's easy to walk, or to bike. Compared to a car, that's almost $6,000 net you can spend on other things.

while city living and thrift stores can abet parsimony, the money gets spent differently, but as you point out, doesn't always benefit the specific locality where you live.

e.g., we are going to Philadelphia tomorrow for a showing by artists that Suzanne knows.

wrt chain guards (and fenders), sure I have one, but maybe I am just a spazz. S*** happens, and my clothes get wrecked in ways I can't even figure out.

but since I am a transportational bicyclist I don't need special bike pants, even though the special Rapha stores are cool.


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