High Gas Prices Aren’t the Problem – Lack of Affordable Alternatives Is
Once again, rising gas prices are dominating the national conversation. And unsurprisingly, Republicans are making it sound like the problem is somehow President Barack Obama’s fault. Newt Gingrich is running around the country promising $2.50 gas, which is an impossible thing to actually deliver. Meanwhile some on the left want to blame the problem on greedy oil companies or greedy commodity speculators.
Of course, we know that the problem is much more fundamental. We’re approaching, if not already at, peak oil, which means that the oil left will be harder to extract and cost more to bring to market even as global demand continues to rise.
The problem then isn’t that gas prices are too high and that if we could somehow bring them back down we’d all be OK. That’s not going to happen. No, the problem is that we don’t have affordable alternatives available to enough people. That means people – whether commuters, businesses, farmers, or travelers – are usually stuck paying the high gas prices or simply deferring other economic activity.
The evidence is clear that rising prices are a decade-long trend, not some anomaly:
And as Deutsche Bank predicted in 2009, the long-term increases will continue, reaching prices of $175/bbl by 2016:
The effect of peak oil – the declining rate of new oil discovery combined with ever-increasing global demand – will push prices upward until there is significant demand destruction. There are two ways demand destruction can happen – either we build alternatives to driving and enable people to use mass transit to continue getting around, or people just stop driving with no alternative in place, and economic activity falls dramatically as a result.
This process worsens with economic recovery. During the worst recession in 60 years, gas prices never fell below $3/gal in California for any significant period of time. As the economy recovers and gas demand rises, so too will the price.
The solution is obvious: we have to build affordable alternatives to putting gasoline in a machine and lighting it on fire. Californians understand this very well, which is why they not only approved $10 billion in high speed rail funding, but also why 2/3 of voters in Los Angeles, Santa Clara, Sonoma and Marin counties voted to tax themselves to expand their passenger rail systems.
But as gas prices retreated from their 2008 peaks, a new bubble emerged. This was the anti-rail bubble. NIMBYism on the Peninsula, right-wing ideological attacks on rail, and Alan Lowenthal’s concern trolling on the project are tolerated instead of laughed out of the room only because gas prices had retreated to $3 (which is higher than they had been at any time prior to 2006).
When oil prices retreated from their 2008 peak, many older Californians assumed it was the return of normalcy. Having lived their lives with low oil prices, with the 1970s seemingly acting as an anomaly, they came to expect that low oil prices had returned for good, and that there was no need for what they viewed as the “inconvenience” of building things like fast, electric, grade-separated high speed trains. At the same time, state legislators made a series of crippling cuts to public transit agencies even though they had seen dramatic ridership increases in 2008, which were generally sustained through 2009 and had even begun increasing again in 2010.
Enabled by a temporary lull in the upward trend of oil prices, the anti-HSR “bubble” can only be sustained as long as those prices do not rise further. Now that the prices are indeed rising again, Californians are reminded of their desire for a sensible alternative to driving and paying unaffordable prices.
The persistent refusal to deal with the lack of alternatives is one of the great failings of the current California legislature. Local elected officials, such as Los Angeles mayor Antonio Villaraigosa, understand the need well and have successfully fought to fund and build passenger rail. But legislators like Senator Joe Simitian and Senator Alan Lowenthal believe somehow that the risk to the state’s economy from dependence on gas prices is less important than a perceived risk that HSR may take time to get properly funded.
California’s greatest transportation need is to develop affordable alternatives to oil. High speed rail is part of that solution, part of a broader rail network that connects neighborhoods, cities, regions, and even states. Californians want that system built. They understand the path out of high gas prices involves building alternatives. Will their legislators follow their lead?