Finding a Break Point for Gasoline Prices

I’m a little late on the gas price bandwagon with analysis and meta-analysis already covering most of the major transportation and urbanism blogs across the domestic blogosphere. Everyone agrees on a few things: that the public is misguided in thinking that President Obama can influence gas prices in any significant way, that gas prices were artificially low for at least two decades hence, that America still has some of the cheapest gas in the world, and that we are beginning to see the effects of so-called Peak Oil. High concepts are relatively easy to reach consensus on, but what is significantly less clear is what these climbing prices means for the average family.

gas pump Finding a Break Point for Gasoline Prices

Gas spikes typically mean fewer miles spent on the road for obvious reasons. And given the stubborn economic malaise in this country there is worry that upward pressure at the pump in 2011 means something different than it did a decade ago and that (gasp) high gas prices could even put the brakes on a recovering economy. Unfortunately most of the panic is based on heuristic evidence which leaves little to no room in the debate for hard statistics on what the most recent crisis means empirically for families, but thanks to the pollsters at Gallup we now have a decent guess.

According to a Gallup survey published on March 8th, the breaking point for most American families lies somewhere between $5.30 and $5.35—a full $1.50 more than the average American is paying for one gallon of regular unleaded and $1.20 more than those filling up their Benzs and Beamers with premium based on today’s AAA Fuel Gauge Report, a daily report based on up to 100,000 filling station prices. Even more telling is that only 17% of Americans would have to alter their spending habits at gas prices under $4.00 (current average price of regular unleaded: $3.846.)

Gallup Poll Finding a Break Point for Gasoline Prices

The statistics aren’t perfect, of course. States that have low state gas taxes like Georgia and Missouri (as well as Alaska which doesn’t collect one at all) are affected less by real prices of gasoline than states like California and New York, where state gas taxes are higher and demand is extremely high (Californians are paying an average of $4.348 today). Low density states like California, Texas, and Oklahoma are also faced with little recourse to driving nearly everywhere, whereas populations in infrastructure heavy states like New Jersey are able to simply shift their mode of transportation given a shift in pricing. Gas price impacts are understandably lumpy.

Still, with only two states at within one dollar of Gallup’s breakpoint (Hawaii joins California, though we should really consider Hawaii as an exception for obvious geographical reasons) is there much of a reason to panic? Not particularly, and for many progressive transportation advocates this should be viewed as a free look into the politics of raising gas prices whether it’s a “natural” market phenomenon like this or a potentially artificial one like a gas tax hike. Unfortunately the violent outcry against high gas prices and the absolute inability for a majority of Americans to understand exactly what drives gas prices to do what they do even though they think they do (phew) has shown that there is no taste for paying fair market price for a gallon of fuel (and it should be added that this author doesn’t pretend to fully understand the lever-pulling and politicking that goes into gasoline prices). Gasoline consumers (much like public transit consumers in an odd twist of infrastructure fate) would rather not face the complex economic realities of their chosen good—that it is much more complicated than point-t0-point navigation and that price is not a reflection of mood or climate but of competing realities.

(Aside: the environmental argument doesn’t even merit consideration here because it’s almost superfluous. We are consuming a finite resource that has eluded optimal management practices for everyone outside of a few OPEC countries who shrewdly know how to control their taps; it’s market heresy to want to pay a semi-fixed price [<$3.00/gal let's say] when we are sliding down the supply line steadily yet many who embrace that brand of economics don’t see it that way. Untapped domestic petroleum sources buy us another 15 years, a middling piece of temporal real estate geopolitically speaking.)

So we’re sort of stuck. Gas prices will continue to oscillate with the seasons and panic will undoubtedly tag along. We will continue to care and then, somehow, not care until we care again. It’s just gas, after all, and we can always get more.

One comment

  • 1
    March 20, 2012 - 10:18 pm | Permalink

    I enjoy discussions of the technological upside to rising gas prices. Yes it’s awful to pay more for gas (and everything else affected by gas prices), but when market forces put the squeeze on consumers, and therefore producers, innovation is coming. The emphasis on better gas mileage is one thing. Within 15 years there will be a reasonable alternative to gasoline automobiles. Then the marketing will trend away from Eco-friendliness and conspicuous altruism (the Prius model). Hybrids, electric, or something else entirely will become normalized, and at some point in our lifetime gasoline will seem like a horse-drawn carriage. Cold comfort to people struggling financially right now, but at least it will be interesting.

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