Tag Archives: Gas Prices

Look at that, people are price sensitive

A couple of days ago I noted that DC Metro ridership is way up in this era of high gas prices. Today, in the New York Times, I see that it’s not just DC, but the entire country that’s seeing a mass transit boom. In the New York region ridership is up between 5 and 10 percent, depending on the mode of transport, while cities in the South and West have seen increase of up to 15 percent.

Meanwhile, via Kevin Drum, I find this useful chart of average daily miles drive. Obviously, there is a large amount of seasonal variation in miles driven and gasoline demand, but after 2006 and 2007 , which had very little variation in average miles driven, there has been a small but significant reduction starting in about November of last year.

Obviously, it sucks that people are facing financial difficulties and are unable to pay for gas. But, in the grand scale of things, this is exactly what the United States needs. The only way for us to begin to confront global warming is to use less energy. Most economists would say the best way to do that would be to increase the gas tax and therefore the cost of fuel, reducing the amount of energy we use. American politicians have thus far lacked the political will to increase the price of gas, but now the markets are doing it for them. Granted, if Hillary Clinton and John McCain got their way we’d suspend the gas tax to reduce the cost again, but fortunately that idea’s not going anywhere.

Here in Virginia, in an attempt to deal with our choked traffic, a variety of state leaders have proposed raising our gas tax. The State Senate voted in February to increase the gas tax, but the House Republican caucus refused to go along. Now, after the Virginia Supreme Court struck down the regional tax authorities that were established by the 2007 Transportation Bill, there are calls to raise the gas tax again. Democrats are relatively united behind the idea and local business leaders are supportive. They understand that raising the gas tax is good environmental policy and will raise much needed revenue for transportation improvements.

But the state GOP is resolutely opposed. They’ve even stooped to the level of having Speaker of the House Bill Howell attack the state Chamber of Commerce at other business leaders for supporting the idea.

“I’m disappointed. I’m a little concerned that the quote ‘voice of business’ would be calling for a one and a half billion tax increase in a time of recession, a rough economic time,” Howell said. “Their businesses are certainly going to pay the additional expenses. I think it’s ill advised, ill thought out.”

[…]

“I really don’t think it’s representative of the business community at all. And for good reason, it’s not a pro-business thing,” Howell said. “The state chamber of commerce does not represent the small business, it represents the large businesses that are going to do OK. They don’t speak for business, I don’t believe.”

If we want people to use transportation less we need to let the price of gas go up. Given Virginia’s need for money for transportation raising the gas tax makes a lot of sense right now, both economically and environmentally. Economists have long told us that increased prices would lead to reduced demand. Now, with gas prices, people have again proved it. Increasing the gas tax would increase the money available to transportation and would reduce the demand for transportation. This is a win, win proposition for the state.

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