NPR on falling gas prices

There is some pretty good news on American demand for gas, not entirely unpredicted. It’s going down, and energy economists believe that the trend will continue–from National Public Radio.

The great thing about the story: it nicely illustrates all the ways that drivers can substitute different behaviors and technologies to save money before they take the step onto public transit: by changing cars, by shortening trips, by rearranging trips, etc.

This is not to say that I think transit usage hasn’t made a different. Long-term trends towards urbanization promise to redistribute a greater share of the whole population into metro areas. Combined with natural increase in already urbanized areas, we should see more riders riding more over the long term.

Texas’s Proposed VMT Tax

The Houston Chronicle has a story up on VMT taxes:

Taxed by the mile? It may be down the road in Texas | Houston & Texas News |

The comments from rural commentators are hot, and one in particular deserves attention: the rural driver who has a Prius. This is one of the lesser known concerns around VMT taxes or general highway tolls: there is no incentive towards fuel economy. One reason why VMT charges are on the table is institutional worry that hybrids and alternative fuels will take a bite out of gas tax revenues. Just so, VMT taxes or general tolls do not encourage drivers to save fuel per se.

The black area of the bar charts shows the amount of Federal gas tax paid for a 40-km trip with the different fuel economies associated with the two vehicles. The Federal tax does not vary by state, so the Accord and Silverado drivers pay the same amount for Federal taxes in each state, though the Silverado driver pays more than the Accord driver.

One of the key points in the exhibit concerns the difference in state gas taxes and tolls.Tolls (the yellow) are a costly part of the 40-km trip, but a comparison between Oklahoma and California shows the difference that baseline tax and toll conditions can make on what drivers ultimately pay. In Oklahoma, state gas taxes are low—about a nickel per liter—whereas the average for all 50 states is about 7 cents per liter. California gas taxes are high, and Californians also pay sales tax on gasoline, so that the American Petroleum Institute estimates that gas taxes run roughly 13 cents per liter.

California has few highway tolls: it has five tolled highways which account for about 120 miles of the state system. Most Silverado drivers in California pay just the state and Federal gas taxes—the blue and black, which amount to $1.35 in taxes for the 40 km trip, unless they are on one of the few tolled facilities.

Oklahoma has many tolled highway facilities; it has 10 different turnpikes with just under 1,000 centerline miles. Off those tolled facilities, Oklahoma Silverado drivers only pay about 80 cents in taxes for the same 40 km trip for which California Silverado drivers pay about $1.35 in taxes. On tolled facilities in Oklahoma, drivers pay about $1.45 for the trip.

Thus Oklahoma uses tolls rather than gas taxes, whereas California relies on gas taxes rather than tolls. But the tax and toll bills for both states fall within a dime of each other, though their finance mechanisms vary quite a bit. The comparison also shows what happens if you add a toll to a state where the taxes are already relatively high: those Silverado drivers on tolled facilities in California pay a lot more than those subject to tolls in Oklahoma.

Comparing the Silverado and the Accord drivers allows us to see the different driver incentives built in to highway tolls versus gas taxes. The Accord driver saves a lot of money in Federal and state gas taxes in California. What costs the California Silverado drivers $1.35 in taxes only costs the Accord driver about $0.40. This driver saves on the total fuel bill and saves nearly 30 percent in taxes. Thisis where it gets interesting. The Accord driver in Oklahoma, with its reliance on tolls rather than gas taxes, pays about 21 cents when the Silverado driverspay 80 cents, saving a little less than 27 percent on taxes in Oklahoma. This 27 percent is compared to the 30 percent savings in California. Highway tollsdo not reward fuel efficiency the way gas taxes do, and thus drivers face different incentives for fuel economy in different places.

Sustainability New Year’s Resolution: Tire Inflation

According to the US Department of Transportation, improperly inflated tires waste about 5 million gallons PER DAY. That’s 2 billion gallons per year; the GAO estimates a more conservative number: 1.2 billion gallons. Still, that’s a lot of gallons.

Digital pressure meters are cheap and easy to use. Here’s how to check and fill up your tires.

Properly inflated tires are something that drivers can do *now* to save the fuel *now* rather than waiting for any new alternative modes, destinations, or infrastructure.

Is cash for clunkers good policy?

After a bout with the stomach flu, I’m actually feeling kind of human this morning, so I thought I might chat a little about cash for clunkers.

Matt Kahn writes about the program here and here. Slate does a simple calculation here. Matt concludes that the cash for clunkers hurts low-income car buyers in both countries, by effectively setting a price floor for used vehicles, and in the second group of calculations, he works through the carbon return from the program.

I don’t know who designed the program as it was implemented. I was an advocate for a much more limited, spatially targeted version of cash for clunkers prior to this, as it would be very nice to get beaters off the road for local air quality benefits. I also supported a much lower buy-out level, with the supposition being that you’d switch to transit rather than simply exchanging one car for another. Instead, the existing program is targeted towards people who purchased SUVs, woke up when gas prices spiked, and are now looking to offload their bigger cars. And this program does nothing to target gross polluters. Improving mpg does address both local and global emissions, but not as much as explicitly targeting gross polluters would. When I advocated for fleet replacement policies years ago, I was told we couldn’t “do this because it would hurt the poor.” It’s kind of interesting that this existing program, which creates a much higher price floor, has been almost entirely uncontested based on equity grounds.

There has always been some concern about what would happen for low-income motorists when the SUVs began to dominate the secondary market for automobiles. The expectation was that gas guzzlers would so increase the operating costs of motoring that low-income motorists would have to scale back usage. We may be changing that calculus with this program somewhat.

New fuel economy standards

Keith Hennessey (former economic advisor) has some economic analysis of the costs and benefits of the fuel economy policy change, in between all his grumbling about how the EPA (US Environmental Protection Agency) is ‘in charge’ rather that the National Highway Transportation Safety Administration (NHSTA).

This last comment–about who is in charge–is designed to generate comment. He’s been around long enough to know that NHTSA and the EPA are coming out of the Bush Era positioned differently and that the EPA has some strategic agenda-setting to do early on in the new administration. That said, EPA is a cabinet-level agency and these proposed rule changes have been in circulation for a bit. For public policy, we engage both agencies because we are trying to optimize across goals here, ones that are, like many, in tension with each other. Nonetheless, environmental rationales have a lot of currency, and perhaps more than they should here. Given the dominant discourse about sustainability and green-ness–i.e., that we are not supposed to be in our cars anyway–it should not surprise us that crash safety is an undeservedly low visibility issue relative to climate change or that NHTSA is a low-visibility agency, despite the considerable public service it provides.

The tension here–between fuel economy and crash safety–has been in dispute since the original 1975 law that provided for CAFE. The late Charles Lave and his brother, Lester, really helped to clarify the issues. One of their most accessible discussions appears in:

Lave, Charles and Lester Lave, “Fuel Economy and Auto Safety Regulation: Is the Cure Worse than the Disease?” Pages 257-290 in Essays in Transportation Economics and Policy: A Handbook in Honor of John R. Meyer, edited by Jose Gomez-Ibanez, William B. Tye, and Cliffor Winston, Brookings Institution Press, Washington D.C., 1999

There’s always just raising the gas tax, which over time might induce changes in fuel economy similar to the standards, but it allows consumers some flexibility in that they can still opt simply to drive less with their bigger, safer car if that is what they prefer–and driving less would have expected crash safety gains, too. Or what about raising the driving age–something that would lower crash costs considerably–at the same time we encourage fuel efficiency through differentiated vehicle registration fees? There are options here that address both the environment/safety trades. I haven’t looked at any data, so I don’t have any real conclusions here.

One last link: NHTSA’s CAFE page .