A Pain In the Gas

The Mistress of the Dark has twice in the last week blogged eloquently about the price of gasoline, the lack of attention to it by the presidential candidates, and the silly American penchant for buying huge cars that drink lots of that expensive gas. There is, naturally, lots to be said about the price of gas.

First of all, in world terms, our gas is still pretty cheap. In Germany and England, gas costs about $9.00 per gallon, so we have a way to go. That doesn't make the economic pain to the American consumer any less, but it illustrates that we've gotten by well for a long time relative to the rest of the world.

The Government Accountability Office has published several reports examining the price of gasoline. One, "Motor Fuels: Understanding the Factors that Influence the Retail Price of Gasoline," was published in May 2005, but provides still-relevant background on the issue. You can download and read this report (GAO-05-525SP) at the GAO website (or e-mail me and I'll send you a copy); you can also find there numerous other studies and reports dealing with energy policy...none of which anyone in the government appears to be using for anything other than doorstops.

According to the study cited above, the cost of a gallon of gasoline breaks down roughly as shown:

Crude Oil - 48%
Taxes - 23%
Refining - 17%
Distribution and Marketing - 12%

These percentages are not fixed, and vary over time. Today, I would expect that the cost of crude oil is a much higher percentage of the total, as the price charged per barrel is wildly out of line with the actual cost of drilling it. Taxes are still about a quarter of the total, and provide the money to keep roads repaired (although if you live in Northern Virginia, or in my home town of Pittsburgh, Pennsylvania, you'd never know it). The owner of the local gas station doesn't make much on the $3.50 per gallon he's charging you...he gets a few cents of this, and makes most of his profit on auto repairs and the snacks, drinks, and other things he sells in addition to gasoline.

We are, of course, paying the price for the way we've chosen to develop the country. We are a nation wedded to the automobile, with sprawling urban areas, widely-spaced neighborhoods, and poor public transportation. Europe, in contrast, has wonderful public transportation: when I lived in Germany, I took the bus to work almost every day, and the train for longer-distance travel whenever possible. In addition, European towns are much more compact, and it's easy in most places to walk to all the basic things you need: you are seldom not within walking distance of all the stores and other services you might need. In contrast, where I live in Northern Virginia, it's a bit more than a half-mile to the nearest shopping center...not a long walk, but if you're elderly, or it's pouring rain or the snow is coming down, it's long enough.

Big cars are an American tradition, but one that may slowly change as the price of gas continues to rise. Most people don't need an SUV or a huge pickup truck to commute to work...the cost of gasoline may gradually drive those who really don't need such big vehicles to smaller cars, but it'll take a while. In any case, people in this country love their cars - every day when I ride the bus or Metro train to work, I can look out the window and see long lines of cars creeping up I-95 toward DC, most of them with only one person on board.

The skyrocketing cost of gasoline may lead us to improve mass transit, although I'm not holding my breath. It will almost certainly drive higher real estate prices for properties closer to the urban centers, and may lead to a change in where we live - today, in order to afford a decent house, many people live a great distance from DC and accept a very long commute; as the price of gas rises, that may no longer be an acceptable trade. Future suburbs may be built more along European lines, with compact development around a commercial and service center.

Where is all this going? I don't know. But it is, to use the terrible pun, a real pain in the gas.

Have a good day. More thoughts tomorrow.

Bilbo