I actually watched gas prices go up—a guy at a local Getty station today using a pole to remove the “3” from “$3.99” and replacing it with a “4.” Prices have climbed more than 11 cents per gallon in the last couple of weeks, and now stand at around $3.89 for regular and $4.17 for premium. The current price for regular is right around where it was ($3.80) when CNN was wringing its hands about sky-high gas back in 2008.
From Phoenix, there are reports of a sharp increase in people running out of gas (up 19 percent in February), largely as a result of driving around with a nearly empty tank. The average motorist is now paying $12.60 more for a month’s worth of gas (90 gallons) than he or she did in February.
Should we panic? NPR believes in staying calm, because a) prices are higher in Europe; b) we’ve been here before—we haven’t quite reached the depths of 2008; and c) Americans are still spending money on leisure activities, including movies, bowling and casino gambling. So now we’re using out-of-control high-stakes gamblers as gauges of American economic prosperity?
One other thing to put in perspective is that Trilby Lundberg of the authoritative Lundberg Survey on oil prices said a couple of days ago that prices have declined slightly—a penny!—in California, and so far in March crude oil prices have held fairly steady. Lundberg thinks that prices may be peaking. But others aren’t so sure—AAA, for instance, points out that we’re heading into April, which is when the East Coast switches from winter fuel to lower-emission (but more expensive) summer blends. That’s going to send average national prices up, and maybe above the all-important $4 benchmark.
Let’s be clear, here. President Obama never said, back in 2008, that he wants fuel prices to go up to European levels of $9 or $10 a gallon, despite both Newt Gingrich and Mitt Romney saying he did. Rather, he said in 2008 that “the fact that this [$4 gas] is such a shock to American pocketbooks is not a good thing.”
Presidents can’t make prices go up even if they want to, and they’re similarly powerless to bring them down, because it’s an international market. There are tons of reasons prices go up. We can’t drill our way to $2 a gallon gas, because as Obama pointed out, “The problem is we only have two percent of the world’s oil reserves and we use 20 percent of the world's oil.” Still, Americans in a recent Gallup Poll make their views known—85 percent say they want the President and Congress to take “immediate action,” but what exactly would that action be? The same poll reveals that when gas hits $5.30 a gallon, motorists are prepared to make dramatic lifestyle changes, including big spending cutbacks.
But there are some good things that come out of high gas prices—people drive less, for one thing. An AAA poll in early March found 60 percent saying that they’re now combining trips and errands, and 33 percent saying they’re cutting back on vacation driving. Vehicle miles traveled, also known as VMT, has been declining steadily since 2007, unlike in earlier recessions when it barely budged. Economic writer Jared Bernstein sees “a massive decline in driving over the downturn with little uptick since.”
Americans are thinking twice before backing out the Buick, and at least that will ease congestion problems. This news video highlights another interesting phenomenon: People are buying cars like there’s no tomorrow, at the same time they’re cutting back on driving:
All this brings me to a March 23 federal report that only wonks like me even read—“A New Economic Analysis of Infrastructure Investment” from the Treasury Department and the Council of Economic Advisers. It claims that Americans spend more than $100 billion annually on the 1.9 billion gallons of wasted fuel lost while idling in traffic. And we can ill afford that money, because the average American family spends more than $7,600 a year on transportation—more than they do on food and twice the expenditures on health care. For 90 percent of us that means getting around is now absorbing one dollar of every seven.
The report advocates spending on public transit and high-speed rail, as well as fixing our roads and bridges. Americans’ satisfaction with highways is fifteenth among thirty-two developed countries. Transit and rail will get traffic moving more freely, too, but high gas prices turn out to work a lot quicker.