Is It Time to Start Talking About the “Gas-Price Gap”?

There has been a lot of talk, on this blog and everywhere, about the price of gas. Levitt wrote recently in favor of higher gas taxes. I went on Good Morning America last week to talk about factors that do and do not affect gas prices. (Among the events that matter: the International Olympic Committee’s 2001 meeting in Moscow that awarded the 2008 Summer Games to Beijing; this prompted China to use the Games as a national showcase, spurring a huge construction boom that drove up demand for gas and oil.)

But I think there’s an important piece of this discussion that’s being overlooked. It may be obvious, but still, I don’t hear it being talked about all that much: the gas-price gap. For all the talk about the income gap in this country, the education gap, and roughly a half-million other gaps, the gas-price gap strikes me as more significant than we let on. To a working class family with two jobs, three kids, and a house 10 miles from the grocery store, school, and work, the recent spike in gas is a major burden. To a middle class family that lives nearer to amenities — and probably drives a newer and more fuel-efficient car — the price hike is more of a mental disturbance than a real hardship.

I thought about the gas-price gap today when I saw a statistic from the Recreational Vehicle Rental Association showing that R.V. rentals are expected to be 20% higher this year than last year. I have never filled up an R.V. gas tank, but I’m guessing it would cost more than some families’ weekly grocery bill. But if that 20% increase is legitimate, there are an awful lot of people out there on the right side of the gas-price gap.


bbeam

Of course, there might be more rentals because fewer people are *buying* RVs, which might be because they don't want to be saddled with those high gas prices forever (just for one trip).

frankenduf

I thought all the 500,000 gaps reduce to the income gap

giromide

They reduce to the income gap, but there's also a lifestyle gap wedged in there. Dubner said as much in the post.

If I still lived in Texas, I would probably be spending upwards of ten hours in my car each week between commuting and running errands, unless I was lucky enough to work somewhere within reach of the nascent public transportation network in Dallas proper. Since living in Chicago, I spend maybe three hours in my car each week at most to commute to my train station and running errands. My wife spends more time in her car running errands, but mileage-wise, she's definitely covering less ground.

Those numbers are going to drop since we're dumping the second car after buying a bike for my brief commutes and for much neglected family recreation.

synapticmisfires

This assumes that all the low-income families live in rural areas and wealthy families live in suburban areas. What about the urban poor?

Of course, wealthy people can afford more fuel efficient vehicles, but very few of them do because gas prices aren't high enough to bother them, so they buy SUVs. Just in fact, during the 90s cars got less fuel efficient than they had been in the 80s. Which brings us back to the argument that gas is too cheap.

caveatBettor

There's some more detailed data on lower-income family expenditures on gasoline here:

http://www.consumerfed.org/pdfs/CFA_REPORT_The_Impact_of_Rising_Prices_on_Household%20Gasoline_Expenditures.pdf

This will probably not be realized by lower income folks nor their limousine liberal "protectors": green policy will make the poor poorer. And Bush will be out of office, so the journalist will blame Levitt, Mankiw and the smarter economists out there. Which will be economically regressive.

I'd love to hear Steve or Greg talk about these possible second order effects.

zbicyclist

I wish Americans would stop whining and start acting.

I don't think I need to document the whining.

As to the lack of acting:

1. gasoline consumption is UP
Gasoline consumption in the US up 2.5% in Q1 2007: http://www.dallasfed.org/research/energy/en0702.cfm

2. sprawl shows no signs of decreasing. In metro areas like Chicago, there's little population growth but the population is becoming more spread out.

Dubner's posting about an increase in RV rentals is a case in point. I would think ALL RV usage is discretionary, and therefore any 20% rise in RV usage indicates an increase in discretionary motor fuel usage.

zbicyclist

Giromide wrote: "we're dumping the second car after buying a bike for my brief commutes and for much neglected family recreation."

Good for you. Chicago and the older suburbs are pretty well designed for bicycle use -- flat, wide streets on a grid, good maps. [Chicago city map available free and also here: http://www.ci.chi.il.us/Transportation/bikemap/keymap.html ]

Check out the "bikewinter" site to extend that season.

We've gone to one car, and if you have one person who's dedicated to it (that would be me) it's more of an interesting logistical challenge than a burden. Good luck.

snubgodtoh

Who else hates a guy in a Hummer?

egretman

A poll was taken of Hummer owners. They feel patriotic.

rmeidaking

The cost of gasoline is not the core issue driving increases in RV rentals; rather, the total cost of family vacations, including security delays when traveling by air, along with fuel surcharges, is promoting many families to choose to travel to a mid-distance destination via RV rather than by air with car rental and hotel stay.

I'm surprised that you didn't take this into consideration first.

kentavos

giromide,
Bush can still veto the new CAFE standards, but I'd be surprised if he did. The standards are pretty lax despite what the car makers are saying publicly and they're actually probably pretty pleased. Their biggest fear is some rogue state like CA setting their own standards (40mpg by 2015).

I think the impact of rapidly rising gas prices on low income families should be studied.

However, I would really like to see some research on why oil prices should be dictated by a free market when supply is being manipulated.

I'm no expert on how the price of a barrel of oil is derived, so I could be missing a lot.

econ2econ

Just based on my own obersvations of the people around me popping out babies, there is a strong notion that you must have a van or SUV if you have a kid (even just one kid!). This is news to me, as I recall our family of 5 doing just fine with a largish sedan. Parents up front, 3 kids in the back. Easy peasy.

Tommy Jefferson

Darn those evil car corporations for manufacturing cars people demand.

Yes, let's use government violence to force people to drive fuel-efficient cars.

Violence and force are always the best way to accomplish things.

Freedom, liberty, personal choice and responsibility are quaint but outdated concepts when highly intelligent people like myself are available to decide what is best for you.

Relax. I know what is best for you.

Deviant

giromide, I don't see how you blame the car makers for this "loophole" people have always wanted roomy powerful vehicles, whether they needed them or not. In the 60s and 70s this need was met by large station wagons with V8s. When CAFE standards were first put into effect, they had relaxed standards for trucks, which were mostly considered commercial vehicles. With the auto industry no longer making the cars people demanded, they turned to alternatives in the form large vans and sport utility vehicles. If anything it's the American consumer who exploited this loophole rather than take the less desirable vehicles the CAFE standards were at the time shoving down the consumers throats.

Corn

I'm just amazed no one has called him on ten miles being a long distance to drive. Ten miles is nothing, I don't understand what he's talking about. I'll drive half an hour to get to a good ice cream place. Of course, I drive two hours to get to work.

vizeroth

>Their biggest fear is some rogue
>state like CA setting their own
>standards (40mpg by 2015).

CA has had a law on the books for a (relatively) long time requiring the auto makers to sell a certain percentage of vehicles with alternative fuel in the state by a specific year. Unfortunately, any time the year gets close they change the year and/or the percentage to give the auto makers more time to meet the goals. Since I haven't lived in California in 5 years I don't know what the date and percentage is now, but I'm pretty sure the date that existed when I left was sometime either last year or next year.

Timberry

I'm surprised that a phrase like "Gas-Price Gap" doesn't lead to at least additional discussion of the long-term gas-price gap between what we pay in the United States and what the rest of the world pays for its gas.

I do realize that the focus of this discussion is on economic strata within this country, but still, as we get into relative hardships and all, we ought to at least reference how they're doing in the rest of the world where their fuel costs the consumer 3x or so what ours does. And it has for years. And they don't make on average more money than we do, so how does this affect them?

If nothing else, this could give us some insight on what happens here. For example, bicycles per capita in Netherlands and Denmark. Smaller cars.

Tim

egretman

Their biggest fear is some rogue state like CA setting their own standards

Rogue state? That's so funny. Without the CA economy the rest of you fly-over states would be part of a third world country. Bible-thumping backwoods hicks without a clue.

I'm excluding Texas, of course. God's country.

reader231654

well said egretman. the citizens of texas will make you californians' ends painless when we finally take over the world

giromide

Darn those evil car corporations for manufacturing cars people demand.

All I'm saying is that the average American gasoline consumer is undereducated about what comprises the price he or she pays at the pump. The price of gasoline can be lowered simply by lowering the state, county, and city taxes added to the price set by the market, but that's not going to happen.

Yes, I've carved a hate stick for automobiles, and that clouds my judgment, but if there has to be a straw man, and if it can't be the average American, which it really should be, then I choose the automobile industry. This is likely misguided.