Environmental Economics

He said, he said

The funny thing is, high gas prices are mostly a good thing (Gas prices spur sound and fury ...):

“When oil companies are making huge profits and you’re struggling at the pump, and we’re scouring the federal budget for spending we can afford to do without, these tax giveaways aren’t right,” President Obama said in his weekly address on Saturday. But in the Republican response, Rep. James Lankford of Oklahoma countered: “For more than two years, his administration has knowingly increased energy prices by choking off new sources of traditional American energy and smothering our economy in new energy regulations.

Last week, Mr. Obama touched off the latest flurry with a letter to Congressional leaders last week calling for the repeal of $4 billion a year in tax incentives for domestic oil and gas production, saying the industry was doing very well, thank you, and needed no help from the government. Republicans responded that the president’s proposal would only raise the cost of production and the price of gasoline, which now tops $4 a gallon in many parts of the country. ...

The debate may generate a fair amount of noise that provides one side or the other with a temporary political advantage but is unlikely in the end to have an appreciable impact on gasoline prices.

Higher gas prices cause people to use less energy. Using less energy conserves a nonrenewable resource and reduces the negative effects of pollution.The costs of higher gas prices are lost prices and lost consumption. Most economists agree that high gas prices are a good thing for society (i.e., the benefits outweight the costs) and that subsidies to energy companies are a bad thing. 

Most politicians think that gas prices should be much lower than they are right now. The politicians' argument seems to be that their constituents shouldn't be required to pay about $500* more per year on a good whose price is determined in international markets. Increases in the cost of education and health care don't seem to generate the same sort of outrage. Weird.

*Note: 12,000 miles per year, 25 mpg, $1 price increase.

I love setting records!

The average price of a gallon of regular gasoline in Columbus hit $4.08 today for the city, according to auto club AAA. That's a jump of 17 cents from yesterday and beat the old record set in July 2008 by 3 cents.

via www.dispatch.com

Driving costs money, but biking costs time

Soaring gasoline prices are making it easier for cycling organizations in Columbus to build a case for commuting on two wheels instead of four... ...But not everyone can get to work on a bike, said Joe Fish, a planner at the Mid-Ohio Regional Planning Commission. It depends on people's experience level and whether they are comfortable riding on the street, he said. Also, most people don't want to commute longer than 15 minutes, which equates to roughly a 3-mile bike ride, he said.

via www.dispatch.com

UPDATE: John's comment inspired me to do a quick back of the envelope analysis.  Assuming 12mph average biking speed, my round trip commute on bike would take me 2 hrs 40 minutes (16 miles each way).  Driving it takes me 50 minutes.  At about 24 mpg in my car and $4 per gallon gas, the driving commute costs me $5.33 in gas and 50 minutes in time.  Comparing that to the bike commute time of 2 hrs 40 minutes, I have to ask myself is 1 hr 50 minutes I save by driving (and not biking) worth more than $5.33?  I think the answer is obvious (but you might not).

If we had higher gas prices we wouldn't need CAFE standards

From the WSJ Weekly Micro Review:

Linking Mileage to Pump Price
by: Josh Mitchell
Apr 22, 2011
Click here to view the full article on WSJ.com

TOPICS: Regulation

SUMMARY: Auto makers are pushing to link federal fuel-economy and emissions targets to the price of gasoline, saying consumers won't pay enough for fuel-efficient cars to make them profitable if gas prices aren't high.

CLASSROOM APPLICATION: The Corporate Average Fuel Economy (CAFE) standard is the sales-weighted harmonic mean fuel economy, expressed in miles per gallon. The auto industry contends that with CAFE standards in place, lower fuel prices result in lower profits. Suppose to meet a fuel-economy standard that a monopoly manufacturer must sell at least one fuel-efficient auto for every gas guzzler. The monopolist optimally sets the output of each of the autos where the sum of the marginal revenues equals the sum of the marginal costs. Therefore, it is possible that the monopolist will sell one of the autos where its marginal revenue is less than its marginal cost. It is even possible that the price of this auto is less than marginal cost. With regard to demand, the demand for the fuel-efficient car is increasing, and the demand for the gas guzzler is decreasing, in the price of gasoline. If the demand for the fuel-efficient auto is sufficiently low (and price elastic), then it is possible that the monopolist will operate at a loss.

QUESTIONS:
1. (Advanced) Why are auto manufacturers more accepting of CAFE standards during periods of high gasoline prices?

2. (Introductory) Does the introduction of CAFE standards in place lead to the increased manufacturing and sales of fuel-efficient autos?

3. (Advanced) Should the federal government tie CAFE standards to gasoline prices?

Reviewed By: James Dearden, Lehigh University

Here is an excerpt from the article:

The Alliance of Automobile Manufacturers, the industry's main trade group, is proposing that regulators periodically review gas prices and other market factors, and scale back fuel-mileage and emissions requirements if gas prices don't hit certain targets.

As if the goal of the regulation was for car companies to make more money. At least they aren't exacerbating the rebound effect!

"In the Wake of Wednesday’s Tornadoes"

NYTimes.com:

The violent storms that struck the South on Wednesday may break one of nature’s grimmer records. On April 3, 1974, 148 tornadoes touched down on a single day and left behind a trail of wreckage nearly 2,500 miles long. As many as 135 tornadoes were reported on Wednesday, wrecking homes, towns and lives.

As of this writing, nearly 300 people have been killed by the storms, 195 of them in Alabama. According to some estimates, the power outages could affect as many people as Hurricane Katrina did. ...

We cannot imagine the force those storms carried or the grief and destruction they left behind. We hope, as everyone must, that there will be clear weather following, giving Southerners a chance to mourn the lives that were lost and start the rebuilding.

Tornados

The NYTimes has video.

Steady state environmental policy

From the blog formerly known as Green, Inc.:

Even if the United States takes no explicit action to regulate greenhouse gases, emissions of carbon dioxide and other climate-altering substances will grow slowly over the next two decades, not returning to 2005 levels until 2027, according to a new projection from the Energy Information Administration, the research branch of the Energy Department.

Carbon dioxide emissions fell by 3 percent in 2008 and 7 percent in 2009, largely because of the recession. But even as economic activity picks up, emissions will grow at a modest pace because of growing use of renewable technologies and fuels, improved energy efficiency, slower growth in demand for electricity and the growing substitution of natural gas for coal in power production, the agency reports in its annual energy outlook.

via green.blogs.nytimes.com

One of my senators talks about rising gas prices

Is speculation on the oil market really illegal?

Democratic Sen. Kay Hagan this afternoon asked the Obama Administration to speed up efforts to crack down on price gouging and illegal speculation on the oil market.

...

Last week, President Barack Obama crated a Oil and Gas Price Fraud Working Group to report recommendations before the July 4th holiday. Hagan called on the White House to provide the recommendations prior to the holiday.

via projects.newsobserver.com

One of my recommendations would be to stop saying silly things about gouging and speculation in the oil markets. I'll offically release it before July 4.

Check out our new widget from oilprice.com

From the inbox:

Hi John,

We’ve just finished coding the widget for your site and the code is below:

<script src="http://oilprice.com/widgets/worldenergyd.js" type="text/javascript"></script>

I hope your readers enjoy the information and if you have any problems, questions or we can help with anything else please just say. Have a nice day.

Regards, James

We've put it in the left hand column. There are more widgets here.

My spring football recap (with no mention of The Ohio State)

John Clay:

The SEC has released spring game attendance figures for each of its 12 schools.

Kentucky’s crowd of 4,000 was dead last.

And, to be truthful, I’m not sure there were 4,000 there.

Here’s the list:

• Alabama 92,310
• Auburn 53,209
• Florida 51,000
• Georgia 43,177
• Arkansas 42,000
• Mississippi State 36,357
• Tennessee 35,891
• South Carolina 29,451
• Ole Miss 28,000
• LSU 25,032
• Vanderbilt 7,500
• Kentucky 4,000

via johnclay.bloginky.com

At least Kentucky and Vandy both have Ivy League-type academic emphases.