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Posts Tagged ‘gasoline’

A 12-Step Program for Fuel Subsidy-aholics

Back when blog posts were composed with reed styluses on clay tablets, I put up a couple of posts (here and here) on fuel subsidies in the developing world. These are generally 1) fiscally ruinous; 2) terrible for the environment and traffic congestion;  3) highly regressive with regard to wealth distribution; and 4) market-distorting by artificially promoting fuel-guzzling industries. So I made the case that this is a pretty foolish public policy, in fact one of the worst I can think of. It’s up there with tobacco subsidies, the Concorde, pretty much everything the North Korean government has ever done, and our government’s failure in spending a paltry $615,000 taxpayer dollars for UC Santa Cruz students to digitize priceless Grateful Dead photographs, t-shirts and concert tickets.

Given the problems with fuel subsidies, I promised a third post on what to do to eliminate them. But since I have a day job, and being a professor is much more difficult than it looked when I was undergrad, I’ve procrastinated on putting this last post up. However, engineering student Kishore from India wrote asking where part three is, and customer satisfaction is a goal here at Freakonomics. Besides, no doubt governments around the world have been waiting impatiently for my post before they start dismantling their fuel subsidies, so here it is.

Given the damning case against fuel subsidies, and a rising swell of opinion that they are counterproductive on many levels, why don’t these policies go away? The IMF (see this) and I offer several reasons:

Could Gas Cost More Than Your Car?

A major story on the NBC Today Show was about the sharp rise in the price of gasoline.  One “expert” claimed that, unless you have a very fuel-efficient vehicle, over a car’s lifetime gasoline will cost you more than the purchase price.  Really?  Say a new car costs $20,000, and is driven for 10 years, 12,000 miles/year.  If gasoline is $4/gallon, and the car gets a paltry 24 miles/gallon, today’s average for new cars, gasoline costs $20,000. So, even without discounting. the “expert” is wrong. 

Even if gas were $5/gallon, unless one discounts the future at a rate below 1 percent, the present value of the gasoline purchased is less than the price of the car.  I doubt that there are many new vehicles for which the expert statement is true, even if gas prices rise permanently far above the current price.  I do wish so-called “experts” knew the basics of Econ 1.

How to Be ExxonMobil

Foreign Policy interviews Steve Coll about his new book Private Empire, which is about ExxonMobil’s ongoing dominance. Coll explains the company’s competitive strategy, which it relies on when competing against other companies for African contracts as well as with state-owned oil companies in the Middle East:

I also think that the way they win these deals in a place like Chad or Papua New Guinea or Angola is, in effect, they go to the host country and say: “Look, we recognize that you can deal with the Chinese, and you’ll get soft loans and guns and things that you think are more valuable than what we can offer you, but what you’ll also get is really lousy project management. You’ll get less oil pumped, you’ll get less royalties, you’ll get less taxes, so you’ll end up net poorer. Why not come work with us under our rule of law, under a really straightforward contract? And what our record shows is that you’ll end up with more cash faster — and then you can use that cash to buy whatever guns you want? But you’ll have the money to carry out what ever plans you have; and we’re reliable, we’ll come in on time.”

Why Don’t People Run Out Of Gas Anymore?

Blog reader Becky Roser sent an interesting email recently:

My father pointed out something interesting the other day – almost no one runs out of gas anymore. When gas was $0.60 a gallon, he maintains it happened all the time. Now that it’s $4.00, you almost never see it. I have vague memories of my father running out of gas when I was very young, but I’ve never done it. What changed?

The Wastefulness of New Jersey's Gas Pumping Restrictions

Driving through New Jersey we stop for gas and sit for a few minutes until the attendant comes to fill our tank. My son tells me that is because New Jersey has one of the most wasteful restrictions in the Union: There is no self-service gasoline; all gas must be pumped by an attendant. This wastes drivers’ time—it’s almost always quicker to pump gas oneself. The labor of the attendants is thus devoted to generating economic waste and could be spent productively elsewhere rather than in promoting economic inefficiency. Perhaps at one time the restriction was based, as they usually are, on health/safety, or perhaps on preventing pilferage. But today, with credit-card pumps and few (no?) cases of people burning themselves pumping their own gas, the restriction has no rationale—other than protecting the attendants’ jobs.

Don't Read This Post

Quick, how many of you can tell me:
1. Your cars’ fuel economy in miles per gallon or, even better, gallons per mile.
2. How much you drove in the last year.
3. The cost to fill your tank.
4. Your monthly and annual fuel expenditures.
5. How your cars’ fuel economy sits in relation to other cars in their classes.
6. What your fuel savings in gallons and dollars would be if you switched to a hybrid or other highly economical vehicle.

It Won't Be So Bad: A Q&A With the Author of $20 Per Gallon

It’s notoriously hard to predict gas prices. Who would have thought in 2006 that we’d be paying $4 a gallon in 2008? Or, as prices peaked last year, that we’d be filling up for $2.50 a gallon this summer?
That said, civil engineer and Forbes reporter Chris Steiner argues that prices will rise precipitously over the next few decades. (It would probably make as much sense to argue that electric cars will take over and gas prices will fall, but that’s another argument for another day.)

Buy an S.U.V., Save the Planet

Scientists and engineers are racing to develop technologies that will improve fuel economy and perhaps replace gasoline altogether. This is certainly to be applauded. But there may be an easier and more effective way to help wean ourselves off foreign oil and fight global warming. Interestingly, it involves not 21st-century technology but 28th-century technology — as in 28th-century B.C.E.
What’s better, it will enable us to shed the pounds with comparatively little diet or exercise. We can improve fuel economy not through the onerous task of developing next-generation lithium-ion batteries but simply by getting people behind the wheels of S.U.V.’s. How?

How Laziness Makes Me Keep My Used Car

Prices of used cars are rising, and the reason is substitution: in tough times, people substitute away from new cars and toward used cars. The two markets are closely related, so a decrease in demand in the new-car market causes an increase in demand in the used-car market. I’m sorely tempted to trade in my gorgeous 1999 Honda Civic SI, . . .

Want A Politically Viable Gas Tax? Make It Voluntary

Like Greg Mankiw, I think it’s a no-brainer that we should raise the gas tax. But it’s incredibly difficult to muster the political will to impose a traditional tax. (Witness California’s inability to increase the state gas tax by a measly 12 cents.) Last year, Robert Samuelson (and a host of others) proposed a contingent tax that only kicks in . . .

The Rebound Effect of Higher M.P.G.

In my last post, I blogged about my (mostly) favorable reaction to California’s program to increase fuel economy. But for the record, I should mention a few petty details — like the fact that these regulations will increase congestion, damage our roads, cut tax revenues, promote (for better or worse) low-density suburban development, and reduce pollution less than advertised. Oh, . . .

I'm Sorry, But We're All Paying Less for Gas

A story in our local paper talks about the problems of West Texas. This area, the center of the Texas oil industry, is suffering. People are being laid off from the oil fields, because drilling has, as it were, dried up. No surprise: With the price of oil below $40, and with drilling a supply response to shocks that raise . . .

Our Daily Bleg: Who Are the Gas Siphoners?

A reader from Boston named Robert Veneman-Hughes writes in with a bleg request on a subject we’ve wondered about before here: gas siphoning. Here’s what I wrote not long ago at the end of a post about an increase in theft of catalytic converters: I haven’t read many articles lately about people who steal gas out of people’s tanks, even . . .

High Gas Prices: The Environment’s Best Friend

Are you driving less than you used to? As Dubner blogged last week, Americans logged 11 billion fewer miles on the road in March of this year than they did in March 2007. That contributed to a cut of 9 million metric tons of carbon dioxide emitted by the U.S. in the first quarter of 2008. The rise of gasoline . . .

Elections, Hot Air, and Gas

Election season is probably the best time for bad economic policies to garner support — and one of the roles of academic economists is to call the candidates out on terrible policy. From yesterday’s New York Times, we learn that: Senator Hillary Rodham Clinton lined up with Senator John McCain, the presumptive Republican nominee for president, in endorsing a plan . . .

The FREAK-est Links

Can studying earthquakes lead to a cure for epilepsy? Should we be able to buy organs? AEI to host a discussion. The irrational truth about humans and money. (Earlier) Ferrari explores switching to ethanol. (Earlier)

The FREAK-est Links

Google directions soon to be available at gas pumps. Pet rental business thrives in New York. The economics of newspaper Web sites: do subscription models beat advertising models? What’s the all-time record high for oil prices?

The View From Mexico City

I was in Mexico City the other day, giving a talk at a conference sponsored by the Mexican Stock Exchange, which is considering going public. The conference was primarily an educational one (except for my talk). Among the big issues of the day: offering Mexican investors some of the shiny financial instruments that Americans are fond of, in particular REITs . . .

The FREAK-est Links

New York’s most popular baby names in 2006. (Earlier) The science of four-letter words. Can immigration levels affect gas prices? College pharmacies jack up birth control prices, fewer women fill prescriptions.

What’s That Have to Do With the Price of Corn?

The rising price of corn due to ethanol demand will have a variety of unintended consequences. As noted earlier on this blog, it might even make Americans skinnier, since food manufacturers may start using a cheaper (and less fattening) substitute for corn syrup. Along these same lines, I heard a story not long ago at an event full of bankers . . .

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 . . .

Eating Too Much Leads to More Gas

Given my father’s medical specialty, you might think I’m referring to intestinal gas. Actually, though, I am talking about the kind of gas you put in your fuel tank. In a recent study, researchers at the University of Illinois have calculated how much extra gasoline is being used each year because Americans weigh more and thus require more fuel to . . .

Why Is This Man Charging $4.30 for a Gallon of Gas?

There is a Shell station in San Francisco, at Sixth and Harrison, that was recently charging $4.33 a gallon for regular gas and $4.43 for premium. Across the street is a Chevron station that charges about 70 cents less per gallon. Can you guess why? I seriously doubt it. You might think it has something to do with Shell vs. . . .

The FREAKest Links: Happiness, Gaming, and Congestion Edition

We’ve written quite a bit about the science of happiness. Now a study by Nattavudh Powdthavee, a research officer at the University of London’s Institute of Education, has taken the debate a step further, assigning monetary values to intangibles like good health and better relationships. He argues that more time with loved ones merits a $179,000 happiness-equivalent raise, while marriage . . .

Hurray For High Gas Prices!

For a long time I have felt the price of gasoline in the United States was way too low. Pretty much all economists believe this. Greg Mankiw blogged back in October about the many reasons why we should raise gas taxes. The reason we need high gas taxes is that there are all sorts of costs associated with my driving . . .

The FREAKest Links: Gas Hikes and Bridal Blogs Edition

Given that we’re already spending the GNP of a small nation on weddings, why not include a little Internet video to share those Big Days with the world? The Wall Street Journal reports that wedding Web sites are a bigger phenomenon than ever, with couples sharing details of their nuptials in blogs, webcasts and online videos. Consumerist offers a conspiracy-busting . . .

The Price of Eggs: A Leading Indicator?

The average U.S. retail price for a dozen large eggs was $1.51 in the first quarter, up 33 cents, or 28%, from the fourth quarter and 43 cents higher than a year ago … Behind the higher prices: Feed. Rising corn and soybean prices have led to increased costs for feed. The increase is in large part because of rising . . .

News and Notes From Canada

I’ve just returned from a quick trip to British Columbia (specifically to the ski town of Whistler, to which one can only properly say “wow”), and a couple of things from western Canada caught my eye. The first is this blog post about the use of urinalysis for construction job applicants in Alberta, where the long-standing oil rush is headier . . .