"Who's to blame for $4 gas"

I'm as angry as the rest of you.  I filled the tank on the family minivan this morning: $85. 

CNN asks why gas prices are high and gives some nice explanations:

• 2004: Demand pressure
• 2005: Katrina
• 2006: Mideast political instability
• 2007: Lack of non-Opec production
• 2008: Speculative bubble

Not unreasonable, but I just want to make two points...  

1. There's no mention of the long-term price trend.  The graph to the right gives the 6 year monthly average for U.S. gas from gasbuddy.com.  There is a distinct upward trend in prices since 2002 (and even further back, but the gasbuddy data doesn't go back any further).    The moments of panic--Fall 2005, Spring 2006, Spring 2007, Spring 2008 all have simple explanations--Katrina, Spring, Spring and Spring (The demand for gas increases in the Spring due to more driving).  But those are just fluctuations around a longer noticeably upward trend in prices--just as economic models of of a depletable natural resource predict.  Scarcity causes higher prices, and that's a good thing.  Higher gas prices lead to conservation on the part of consumers, exploration on the part of producers, and innovation on the part of alternative energy entrepreneurs.
2. The real question CNN should ask is:  What can you do about $4 gas?  There is only one answer.  "Drive Less".  You as a consumer have control over your own gas purchases and little over the market price.  The choice to drive less may be uncomfortable, but all the whining, crying and shouting for the government to do something will only make the situation worse.  Price controls, gas rationing, windfall profit taxes, gas tax holidays...are all bad policies that may make you (and politicians) happier in the short run but will make everyone miserable in the long run.  Your solution to high gas prices is to adapt.  Drive Less!  If the market adjusts, all the better, you're saving even more money.

Comments

[Don]

Dear Tim: Would not be "use less" be a more inclusive prescription that takes into account efficiency?

[Lou Grinzo]

One minor correction: Driving less isn't the only solution (short of buying a more efficient vehicle). The average American driver can easily save 20% on their gasoline consumption by using a mild form of the driving techniques collectively known as "hypermiling". I do this with my Scion xA and average well above even the old, pre-2008, "too high", EPA figures for this model.

All you have to do is keep your car in tune, inflate your tires properly, coast up to stops (traffic permitting), and, most important of all, accelerate less aggressively. The average US driver drives like he or she is coming out of turn four on the last lap of the Indy 500. Stop that! You're needlessly throwing away money and pumping more CO2 into the atmosphere.

[Tim Haab]

Don,

Absolutely, in the long-run. But during short-term run-ups drive less is more appropriate. besides, Drive Less has a history on our site and I'm kind of partial to it (Search "Drive Less" and NPR on the right and you'll see the origins.

[Don]

Lou's observation of hypermiling is apropos. It is practiced by my bro in Florida, in his 15 year old Mazda, with the result of between 10 & 20% fuel savings. He has not gone to the extent of keeping the windows up in summer (which requires an ice jacket or what ever it is called---one would have to factor in the cost of making the ice, inter alia)

[Ironman]

Don - not necessarily. People who drive highly fuel efficient cars don't necessarily use less gas. They often end up driving more than they would if they operated a less fuel efficient vehicle, which means that they consume similar amounts of fuel.

Likewise, "using less" by using substitutes doesn't necessarily translate into greater overall efficiency or lower prices either. Case in point: corn-derived ethanol as a substitute for petroleum-derived gasoline.

No, if we're going to blame anyone for high gasoline prices, we should blame Tim and his strategic oil reserve draining family minivan.

[Tim Haab]

Ironman,

I get almost 25 mpg in my minivan. I've done the cost/benefit and it's not worth it for me to sell. Besides, the minivan is a hit with the soccer moms. Anyone bold enough to drive around an 8 year old minivan must be secure.

[DJ]

I think the question is not "who's to blame" for $4 gas, but "why are we upset" by it-- and the reason is, we in the U.S. have lived with artificially low gas prices for so long that we're used to using as much as we want.

In Europe, gas runs about double what it does here. In many developing nations, a gallon of gas costs two days average wages. Imagine: having to work two days for a gallon of gas! No wonder the middle classes there put families of five on a motorcycle.

In the U.S., where the average wage is about $20 per hour, we still only have to work (an average of) 15 minutes for a gallon of gas. My wage is lowert han that, and I don't like paying more at the pump, but let's quit whining and get real-- drive less, stop buying huge gas-guzzling vehicles, and work from home.

[David Zetland]

I agree with DJ. People are "shocked" about relative changes in prices for something that is as close to a miracle as I've ever run into (besides free pets at the pound :). Consider what you get for $4 -- a gallon of miracle fluid that will move your ass between 10 and 50 miles away at high speed, with music, etc.

Driving is a luxury (look at the rest of the world) and we should not be upset to pay luxury prices for it. The real losers are the commuters -- who decided that they could live 50 miles from where they work. Now they will reconsider their luxury lifestyle :)

[another john whitehead]

According to the EIA, inflation-adjusted gas price is only a little above where it was in the 1920s. Perhaps we should all switch back to Model-Ts? ;)

For a more modern-day comparison, according to the U.S. DOT, fuel only represented 17.1% of a vehicle's operating costs (2006) versus 24% in 1985 or 33% in 1975. So we should rejoice! (or lament the rising cost of vehicles compared to the relatively flat price of fuel)

Now, someone with access to a little more data, compare this to per capita income.

[Dano]

There is only one answer. "Drive Less". You as a consumer have control over your own gas purchases and little over the market price. The choice to drive less may be uncomfortable, but all the whining, crying and shouting for the government to do something will only make the situation worse.

No.

There is another answer, but much harder to make happen: close your live-work gap.

That is: don't live so far away from work. And services. Live in a (or demand more) walkable neighborhood. Land use is a very large component of why our country must drive so much.

And good comments above regarding relative prices and being "shocked - SHOCKED".

Best,

D

[Dano]

And I aver that my live-work gap point is reinforced by 'another John' just before my comment - we must have comfortable vehicles in part because we spend so much time in them.

Best,

D

[samantha]

gas prices are ridiculous what can we do besides not go anywere.......

[Tim Haab]

Dano,

That would be driving less.

Tim

[Mike Giberson]

Not trying to out-bold you Tim, but I drive a 12-year old minivan....

Not for much longer, however.

[...]

I have been saving about $1 per fill-up by pumping 3 gal of e85, then filling up with regular. My gas mileage has not decreased noticeably. I've been told to watch out for decreased power, but I haven't noticed any on my traffic clogged commute.

[Bob Murphy]

But those are just fluctuations around a longer noticeably upward trend in prices--just as economic models of of a depletable natural resource predict.

But didn't a Hotelling-type model predict rising oil prices since the moment it was invented? People didn't suddenly realize oil was depletable three years ago. So why were those models wrong for a century and now they are suddenly right?

(I sound very sarcastic in the above, and I'm not trying to be. But if oil falls to $50 a barrel by 2012--I'm not saying it will--then I think everyone will quiet down and then yell, "Peak oil! We told you so!" during the next run up.)

I am not denying that at some point, perhaps we've reached it, global crude output really will peak. But almost all of the commentary I've seen has cited generic factors that were just as true in 1979 as they are today, the biggest one being, "The world only has so much oil left."

[save money on gas]

Driving less is definitely something that most of us can do, but there are also plenty of things that you can do to increase your gas mileage to decrease the effect to your own personal budget.

[David]

Doesn't the US dollar decline play a role too?

[Ironman]

I never doubted that minivans can make economic sense, nor their popularity with the soccer mom set (and those who hang out with the soccer mom set) - I'm just amazed at the size of the fuel tank! Since most car-platform based vehicles have anywhere from a 12-18 gallon capacity tank, with that $85 bill, I was suspecting that after topping off the tank that you began filling the passenger compartment to ankle depth....

[Tim Haab]

Ironman,

It's at least a 22 gallon tank on my 2000 Chevy Venture (since I put 21.8 gallons in--I ran it to empty because the fuel gauge broke recently and I forgot to reset the odometer this past trip).

[DJ]

"I am not denying that at some point, perhaps we've reached it, global crude output really will peak. But almost all of the commentary I've seen has cited generic factors that were just as true in 1979 as they are today..."

Actually there are several factors today that were not true in 1979, or even 1999:

* Mexico's production has apparently peaked and begun to decline. Over the past six months, they've fallen from our second-largest source of crude to a distant third.

* Iraq and Nigeria have reduced exports because of (what one might politely call) unrest.

* The Saudis have warned that their ability to increase production is limited.

Meanwhile consumption has continued to increase. Admittedly, Iraq and Nigeria are problems with production and not supply, therefore ultimately temporary. But Mexico's sudden decline puts a real crimp in our supply.

[Jack]

I think the exact same rationale can be used for prescription drugs prices. I often tell my mother that whining about the government protecting pharmecuticals companies interests and driving up prices won't solve anything and, besides, the government can only always make things worse everytime without exception if it tries to help people, which it should never, ever do ever. You can't control the market, but you can control the amount of synthetic thyroid you take. Less medication may cause increased pain, misery, and even death, but that's better than interfering with the market.

[Joshua Corning]

The choice to drive less may be uncomfortable, but all the whining, crying and shouting for the government to do something will only make the situation worse. Price controls, gas rationing, windfall profit taxes, gas tax holidays...

You forgot to mention that the government can also sell ANWAR and all offshore oil rights to the highest bidder.

[Sam]

Gas will be $10 or $15 per gallon in next few years, if you don't do something, as an American driving less is not a solution ! We need alternative energy source besides oil! Plug in Hybrid !
http://www.pluginamerica.org/links.shtm

Oil companies and Car companies want us to use ethanol or hydrogen, so we can only fill our car in their stations, they want to slave us again.
Plug in hybrid, we want fill our car in our houses! We want to be free!