http://online.wsj.com/article/SB1227286 ... =yhoofrontWhen gasoline prices shot over $4 a gallon this summer, Americans didn't wait for Washington to respond with an energy policy. They took action on their own by driving less and switching to more fuel-efficient cars.
The results are dramatic, but also problematic.
Join the Discussion
Readers, over to you: Will lower fuel prices change your driving habits and vehicle purchase plans? Cast your vote and join a discussion.
See more coverage of the Auto Industry Bailout.The good news is that gasoline consumption has fallen compared with a year earlier in every month from March through September of this year, according to data from the Energy Information Administration. Vehicle miles traveled -- the wonky term for how much we drive -- have dropped for 11 straight months, and fell 4.4% in September, according to the Department of Transportation.
The only people driving more in September than a year earlier were the proud few who live in North Dakota and the denizens of the District of Columbia. The lousy economy depressed driving in many parts of the country. Our nation's capital, however, is a rock that's always above the water line whether the economic tide is high or low.
In short, many Americans, by choice or by default, did what the people who worry about the climate and U.S. dependence on petroleum wanted them to do. They burned about 5% less gasoline in August than a year ago, according to Energy Information Administration data.
By jamming the brakes on driving, rediscovering mass transit and walking past Hummers to buy compact cars like the Honda Fit, American consumers caused big trouble for powerful interests. The question now is how will those interests respond?
The oil industry and oil-producing nations have an acute problem, because the combination of conservation and the worst world-wide economic slump in decades has once again made a mockery of recent projections that oil would remain expensive and scarce forever. As of late last week, oil prices had fallen below $50 a barrel -- compared with more than $140 a barrel this summer.
Experts who watch world oil supplies still say that over the long haul, demand for petroleum created by the growth and modernization of China, India and other emerging economies will make oil expensive again.
The short term, however, looks like a re-run of the late 1970s and early 1980s, when oil doomsayers were trumped by supply and demand. When oil prices soared in that era, interest in electric cars, windmills, solar heating panels and other petroleum alternatives accelerated. When conservation and new oil discoveries caused oil prices to collapse, the economic justification for expensive, immature oil replacement technology collapsed as well, and it was a skip and a jump to the age of the SUV.
President-elect Barack Obama reflected on this in a "60 Minutes" interview last week. "We go from shock to trance. You know, oil prices go up, gas prices at the pump go up, everybody goes into a flurry of activity," he said. "And then the prices go back down and suddenly we act like it's not important…And, as a consequence, we never make any progress. It's part of the addiction, all right. That has to be broken. Now is the time to break it."
But the federal government is conflicted, too. Yes, policy makers want us to conserve oil. But now that we have, the funds that pay for roads, bridges, rail transit and other transportation infrastructure are falling right along with gasoline tax receipts.
Journal Community
Subscribers can comment through WSJ.com's comment tab or join the All Things Autos group in Journal Community.
The U.S. Department of Transportation last week said that gasoline taxes paid into the highway trust fund fell by $3 billion in the 2008 fiscal year.
"Our current approach has us encouraging Americans to change their driving habits and burn less fuel while secretly hoping they drive more so we can finance new bridges, repair interstates and expand transit systems," Transportation Secretary Mary Peters said in a statement. "We need a new approach that compliments, instead of contradicts, our energy policies and infrastructure needs."
One new approach would be to raise the federal gasoline tax from its current 18.4 cents a gallon. By comparison, the tax rate in the U.K. is about $2.85 a gallon. So far, it seems as likely in the current economic climate that Congress will outlaw Big Macs as entertain a plan to raise gasoline taxes. Higher gas taxes could finance improvements to roads and mass transit, encourage further conservation or offset the costs of the various federal bailouts. But the collapse of gasoline prices since the summer -- a drop of more than $2 a gallon in my neighborhood -- is an economic stimulus worth more than $200 billion a year.
This puts the people who seized on the recent gas price shocks as the moment to push green vehicle strategies in a bind. So far, the car companies that vowed that they would, finally, get serious about electric vehicles or advanced hybrids all are sticking to their guns. So are some of the upstart electric vehicle ventures that had the wind at their backs when oil prices were in the triple digits. The mayor of San Francisco last week celebrated a deal with electric car venture Better Place to make the city by the bay the electric-vehicle capital of the U.S.
Nissan and Renault CEO Carlos Ghosn talks with WSJ's Eyes on the Road columnist Joe White about proposals for a government bailout of the auto industry and how such assistance should be applied. (Nov. 18)
Carlos Ghosn, the chief executive officer of Renault SA and Nissan Motor Corp., said in an interview this week that he is still determined to build electric vehicles for sale in 2010, despite the economic malaise. General Motors Corp. has insisted that its plug-in hybrid Chevy Volt, due in 2010, will survive the cost-cutting as the auto giant struggles to survive.
At current gasoline prices, however, consumers who buy expensive electric or plug-in hybrid cars would find it smarter financially to buy a reasonably efficient, conventional subcompact and work from home one day a week.
If gasoline prices stay low, demand for vehicles that use sophisticated technology to consume less gasoline per mile will depend on consumers making long-term decisions that aren't in their short-term economic interests. Otherwise, these new high-mileage cars might not sell for high enough prices to cover their higher costs.
A lot depends on whether Americans keep doing what they're doing, regardless of what the numbers are on the gas station signs.
As a person who dislike the idea of private ownership of cars, I am glad to see this fact.
And I don't think there is a thing called a short term economic 'interest' in this scenario.
"
- PeZook
