Here’s a chart from a recent Star Tribune article about the price of gasoline. It’s not a great chart, but you can look at it anyway:
First, here’s the article’s main point, which is about how price per gallon has dipped below $2:
The lowest price anywhere in Minnesota on Thursday was $1.88 per gallon at the Sam’s Club in Sartell, according to GasBuddy. At least nine other Minnesota stations had prices at or below $1.91 per gallon, several of which were in the Red Wing and St. Cloud areas.
The average price in the Twin Cities on Thursday was $2.13 per gallon, while the national average was $2.25 per gallon, according to GasBuddy.
Motor vehicle fuel purchases made up about $2,000 or 3.3 percent of the average U.S. household’s expenditures in 2017, according to the U.S. Bureau of Labor Statistics. Falling gas prices give consumers a bit of an economic cushion, just as soaring prices pinch a household’s budget.
The problem with this chart is that it zooms in on a tiny fraction of time (2 years) and price ($2-$3).
To me, it’s much more interesting to think about gas prices over the long term, and accounting for inflation, etc. We’ve done this many times at streets.mn over the years.
For example check these out.
The Inflation Adjusted gas price chart, 1918-2012:
Historical and projected gas prices 1985 – 2039:
Gas price vs. real wage, 1975 – 2015:
My favorite kind of analysis, though, looks at how much of the “true cost” of driving car is reflected in the gas price. The answer is “very little”.
One of the priorities of Governor Walz’s administration is to pass a gas tax increase this year.
Yes, the cost of gas isn’t a large component of the overall cost of owning a vehicle, but it’s a pretty substantial component of the marginal trip cost. Once you own the car, the capital is already sunk cost, and decisions about whether to drive “should” (in the classical economic sense of “should”) take into account only the marginal cost. Which is part of why people drive too much, and part of why gas prices, parking and tolls have a substantial influence on mode choice.
Sure, but part of the problem is that the marginal trip cost is tiny, way too small IMO. (Thus the extreme reactions many people have to paying for parking.)I am looking forward to when auto travel reflects a fee-for-service model.
… which I doubt will ever happen.
As for the “extreme reaction many people have to paying for parking” it’s more the psychology of “free”.
“If you recall, in one trial of one study we offered students a Lindt Truffle for 26 cents and a Hershey’s Kiss for 1 cent and observed the buying behavior: 40 percent went with the truffle and 40 percent with the Kiss. When we dropped the price of both chocolates by just 1 cent, we observed that suddenly 90 percent of participants opted for the free Kiss, even though the relative price between the two was the same. We concluded that FREE! is indeed a very powerful force”
Airlines can get away with unbundling because there’s few enough of them that they can all decide to do it together, and people use search engines looking for the lowest price for airline tickets; they don’t with eggs and corn flakes. What keeps the ultra-low cost carriers in business is that people buy tickets without mentally adding in all the fees if you want to say take baggage on your week long trip to Florida, which can make Southwest cheaper.
Just my theory, but I think it’s more a reaction to the gap in agency. The sense of “control” one has on a road is very much removed when in a congested parking lot, cruising for an on-street space, or “forced” to enter a pay ramp. This gap in agency is extremely aggravating because it so disrupts the narrative drivers have about how cars work.
I think Bill, you’re taking a privileged position and assuming that people are doing it to be “cheap” rather than doing it because the money has some value to them. Maybe you haven’t been there, but to quite a few people that $10 to $20 means a lot, and they would rather save it for other uses than spend it on a ramp, especially when that means they have access to free or cheaper parking within a reasonable distance.
Also, since we don’t live in a dense metro area, that additional parking fee that you promote to limit driving will also limit people. This may be fine if businesses have enough of a local draw, but they may take a hit from those used to driving in. Personally I’ve done less in UpTown and Downtown/Loring Park due to this, just too much of a pain.
Also, we do have a pay to play model with cars. I pay a gas tax, license fee’s, I need the yearly sticker (thankfully my 911 is getting to be a collector soon), and insurance. As well as other state and federal taxes go into roads. Maybe it’s not as high as you feel it should be, but it’s not like we pay off our vehicle and it’s free to buzz around.
The direct costs are in two categories: per-mile costs, which are microscopic, and one-time / annual costs such as tabs. The point is that those latter costs are not paid on a per-trip basis. It incentivizes driving, once you have invested in the “sunk cost” of having an insured, licensed, working car in the first place.
This chart is pretty cool and gets at my point: https://streets.mn/2016/02/16/chart-of-the-day-costs-of-urban-travel-by-mode/
Second, we all pay the cost for parking, indirectly. If you want to make an equity argument, focus instead on how people who don’t drive subsidize those who do.
The recent column at City Observatory captures both these tensions… http://cityobservatory.org/ten-things-more-inequitable-that-road-pricing/
7. Paid parking. In many locations, particularly dense city centers, you practically can’t use a vehicle for transportation unless you are willing to pay for its parking space either at a metered space on the street, or at an off-street lot or parking structure. While cities do provide free parking for disabled citizens (a perk that is frequently abused), parking meters don’t charge different rates to users based on their income; you have to pay the same amount to park your used Jetta as you do your new Mercedes. Again: the cost of parking bears more heavily on the poor than on the rich, both as a share of income, and in relation to the value of their vehicles. Plus, we haven’t even said anything about the provisions of the tax code that subsidize parking, chiefly for high income workers. That’s inequitable.
8. “Free” parking. As Donald Shoup has demonstrated time and again, there’s nothing free about free parking. The effective requirement that people have to build new parking as a condition of getting a building permit for a store, office, home or apartment, drives up the cost of new construction and housing. In addition, those who don’t own cars, who walk, cycle and ride buses, end up subsidizing those who get the free parking. One study estimates that carless renters pay almost half a billion dollars a year for garage parking that’s bundled in their rent, but which they can’t use, because they don’t own cars. As we wrote in our commentary on the triumph of parking socialism, the law in its majesty provides free parking to everyone, whether they own a vehicle or not. As a practical matter, “free” parking, like free roads, benefits those with higher incomes who can afford and who use cars extensively.
The key point for me is that driving personal cars is a system that not only perpetuates inequality for individuals on a case-by-case basis as you point out, but also has huge social costs. I don’t see an easy way to begin to change this broad social structure without increasing costs in certain ways, e.g. direct payment for parking,
I suspect if we are forced into a pay per mile scenario that people will stay home and not travel as much. This will kill the economy as entertainment and tourism businesses lack for customers. You might not take your kids to say the Children’s museum if suddenly it costs $20 to $30 to use a car instead of $5 worth of gas.
Monthly costs for a car might include $350 for a car payment, $75 for insurance, $125 for gas, and $100 in other costs to drive 900 miles per month. So, $650 a month. If your car is paid off the monthly cost is quite a bit less although repairs might be higher.
I am just guessing that by the mile might be $1 per mile so $900 for the month. Even if the cost per mile was the same people will perceive it to cost more so they will likely use less. They are shelling out every time they go anywhere instead of a few big payments per month.
When you say “killI”, I think you mean, “be a giant boon too.”
People aren’t going to go without entertainment, tourism and hospitality. They’re just going to get it from more places, closer to home. Think about how much more people will have to spend when it’s not all going to their car.
The money formerly spent on a car will just go to pay for renting a car on a per mile or per hour basis. The only savings will come from people traveling less when they have to shell out any time they go anywhere.
A lot of entertainment spots are too expensive to build to have more than one or two of them in the metro area. It would be pretty unlikely to see a second Valleyfair in the metro for example.
most of the people I know who go to Valleyfair do it in groups – busloads of school kids, vanloads of family. That cuts down on per mile cost a LOT.
And if gas and other per-trip costs of driving get too high (including parking) many people opt for transit, and also demand better transit. We have a lot of entertainment venues that are very transit accessible, and there were plenty before car ownership became so widespread too.
That’s something I observed at Valleyfair too, in that the $20 parking charge means everyone packs the cars. There’s not much for transit out there and I’d imagine quite a few of the visitors are suburban kids and families that refuse to ride buses anyway.
But Valleyfair and the Children’s Museum are probably poor examples of the possibility of moving towards charging for parking in general because they do charge for parking now, and can get by with doing so because they’re compelling enough to overcome the deterrent effect. If Menards started to charge for parking everyone would just go to Home Depot instead, even if it’s farther, or else order from Amazon. I quit going to Majors and Quinn because paying for parking made the book bargain I got not a bargain anymore.
I’m talking about the cost of actually getting to places, not parking once you get there.
Today, if I wanted to go to Valleyfair my incremental cost to drive is about $10. (Insurance, car payment, etc are already sunk costs.) If I had to pay by the mile for an hourly/by the mile rental I could be looking at upwards of $80 round trip from where I live. The extra costs means I might just decide to stay home instead of spending $200 at Valleyfair.
I don’t see how what you’ve described is a bug. I only see features. Sure, there is the idea that people will make fewer trips, reducing some economic activity, but that is only half of the story. At the same time there are huge costs on society that we all bear when people drive more than they should based on the unpriced negative externalities. Think health insurance costs (paying for people recovering from crashes), property taxes (paying for road construction and emergency responders), and the cost for retailers and service providers maintaining parking lots that do not directly generate revenue. So, if people have more money in their pockets from reducing those costs, maybe the effect is that they would go to things closer to where they live rather than driving across the metro area, leaving a trail of social costs in their rearview mirror. And then those local stores that everyone wants to love (until they decide to go shop at costco to save $1.25 on 10 pounds of flour) can survive.
More likely people will order flour from Amazon rather than pay top dollar prices at a small local store.
ok, fine. they still have more money with less driving, and society is better off, too.
Any per-mile cost system would increase delivery prices. Amazon free delivery may be a thing of the past or additional delivery costs would be built into base prices, like we already do with the “free” parking.
Also because the externalities are unpriced (and even subsidized).
Chart request: gas price vs VMT vs carbon emissions from transportation.
I wonder what it’d say!