[PhxSprawler]

This article from CNN Money Found Here (http://money.cnn.com/2007/12/18/news/economy/gas_demand/index.htm?postversion=2007121812) discusses the possible reasons demand for oil is decreasing in America.

Personally, I believe it is a long term trend. As leases and loans expire, Americans are turning to more fuel efficient vehicles. Also, public transportation is becoming more mainstream and available in many American cities where it was not previously available. What are your thoughts?


$3 gas: America's braking point

After shrugging off high prices for years, American drivers are finally starting to cut back. Is it a sign of shifting habits, or looming recession?

December 18 2007: 1:19 PM EST

With gasoline staying near $3 a gallon for several months, demand has begun to drop.

NEW YORK (CNNMoney.com) -- Gasoline demand has fallen for the first time in years as drivers appear to recoil from near-record prices, throwing doubt on America's seemingly insatiable thirst for fuel.

Although growth in gasoline demand has been slowing all year, demand has actually fallen for five of the last six weeks compared to the same time last year, according to retail sales data gathered by MasterCard SpendingPulse, a research report that tracks gasoline sales using MasterCard, other credit cards, and cash sales at approximately 140,000 service stations service stations around the country.

"With prices over $3 a gallon, there seems to be some real resistance from the consumer," said Michael McNamara, director of research for MasterCard SpendingPulse.

In some weeks demand has fallen by as much as 3 percent.

Although the public has seen $3 gasoline before, 2007 has been different. Where previous price spikes were short-lived, this one seems to be here to stay.

Another reason demand is falling could be due to a slowing economy, or even fears of a recession.

Since topping $3 back in April, gasoline has stayed consistently high, with the nationwide weekly average price never dropping below $2.70 a gallon, according to the Energy Information Administration. For 19 of the last 33 weeks, gasoline has averaged over $3 a gallon.

The first time in recent memory that gasoline prices hit $3 was September 2005, following Hurricane Katrina, and then once again in the summer of 2006. (gasoline prices were also over $3 in the early 1980s, adjusted for inflation.)

Analysts reported a slight drop in consumer demand growth following each of those spikes, but they where short lived. Gasoline eventually returned to the low $2 range and demand quickly resumed its normal rate of growth of around 1.5 percent per year.

Fuel efficiency and the American driver
For the last few months gasoline demand growth has been relatively flat, according to the EIA. This drop in demand is a main reason why gasoline prices didn't follow oil prices to a new all-time record last month.

"Gasoline demand does not usually fall," said Geoff Sundstrom, a gasoline price analyst at the motorist organization AAA. "It could be the start of a trend."

Gasoline is one of those items that some economists consider "inelastic," that is, people will buy it no matter what the cost. But the recent drop in demand puts that into question, and suggest people will cut out unnecessary trips if they are too expensive.

"There is some level of [gasoline] buying that has to occur, people have to get to work," said McNamara. "But not every trip is non-discretionary."

Sundstrom also said they have seen fewer sales of pick-up trucks and large SUVs since gasoline crossed the $3 mark back in 2005, and more sales of so-called "cross-over" SUVs, which are a mix between a car and a traditional SUVs.

RIP for the SUV
That could mean people are buying more fuel efficient vehicles, which is beginning to show up in the demand numbers. But McNamara noted gasoline demand was strong when prices fell from $3 a gallon in 2005 and 2006.

Sundstrom noted that other times when demand has fallen - like after Sept. 11, 2001, from 1980 to 1981, and from 1974 to 1975 - coincided with recessions.

But he pointed out the U.S. economy is much less energy intensive than it was in the 70s and 80s, meaning a drop in energy use may no longer signal a looming recession.

Economists also weren't ready to call the recent drop in demand a death blow for the economy.

"I think its more an indication of how we're using gasoline than a recession story," said Jim Glassman, a senior economist at J.P. Morgan.

[Demand] has been weak for months," said Chris Lafakis, an associate economist at Moody's Economy.com, an economic consultancy, noting that the economy has continued to chug along, albeit at a slower pace. "This doesn't raise the specter of recession."

[LordMandeep]

An economic recession also leads to lower transit usage as well...
SO don't there will be a massive influx of people using transit.
It happened here in Toronto in the early 90's...

Now things are better and mixed in with other factors, transit use is up and has been going up since 2000.

[Justin10000]

Now if only the Canadian, and American Federal Government would invest more in the Public Transit, and highway infrastructure..

[Trantor]

$3 is fucking cheap for a gallon.

in Brazil, a gallon of gas custs U$5.31... and its not even pure gas, but a 20% ethanol mix, therefore, it has less mileage (kilometrage) per litre (or gallon, whatever)

with more expensive gas, americans will abandon their suburbs and move back closer to downtowns. Residential highrises demand will skyrocket.

[alexjon]

Nah, the tide is rolling out on suburbs slowly but surely; out of the big cities (not metros), you only really have San Diego and San Antonio building excessive sprawl, and San Diego is trying to curb that.

Pretty soon, the idea of downtown living will come back. It seems to go in 50-60 year cycles.

[strongbad635]

Sadly, transportation costs are only a part of why American middle class families can no longer save anything. The fact that the minimum wage has lost value for over 2 decades doesn't help, nor the fact that pensions are quickly becoming a thing of the past and healthcare costs have shot into the outer stratosphere.

The suburbs would have eventually collapsed under the weight of their own sustainability, but record gas prices will certainly expedite the process of their demise. As more move into the 'burbs and the central city becomes vacant, there aren't enough people left in the city center to subsidize the building of these far-flung subdivisions. For years, sprawl on the edge of metropolitan areas has been payed for by those left behind in the city. Developers have gotten a free ride when it comes to paying for sewer lines, electrical service, streets and various other public utilities. If developers had to pay for these themselves, the cost would have been passed onto the consumer in the price of a home, and living in the suburbs would not be as affordable as these market manipulations make it out to be. In order to maintain these greater utilities (longer sewer/power lines, wider roads with more asphalt to care for, etc.), property taxes in the suburbs would have to be so high that families wouldn't want to live there.

So, in the end, paying the real cost for transportation will probably be the tipping point, rather than paying the real cost of maintaining the far-flung infrastructure.

[Gava]

3$ a gallon if waaaay cheap, in some european countries the price is between 5 and 6 euros per gallon, you do the math.

[PhxSprawler]

Nah, the tide is rolling out on suburbs slowly but surely; out of the big cities (not metros), you only really have San Diego and San Antonio building excessive sprawl, and San Diego is trying to curb that.

Pretty soon, the idea of downtown living will come back. It seems to go in 50-60 year cycles.

What about Houston, Phoenix, Dallas, and San Jose? Only sticking to the 10 biggest cities (not metros) in America, I would say all of these mentioned equal or surpass the excessive sprawl of San Diego and San Antonio.

I would also agree every single city in the top 10 has plans to improve its downtown area and increase its urban population- whether sprawling or not.

[Echo Park]

Guys, record gas prices aren't going to curb sprawl or force people to use transit. So there's no point in cheering on soaring prices. People will not go on trains, they'll simply pack up and move to cheaper cities or buy cars with better fuel economy, but they won't move downtown and ride trains.

[Echo Park]

I would also agree every single city in the top 10 has plans to improve its downtown area and increase its urban population- whether sprawling or not.

That's cute and all that our cities are increasing downtown populations but again it doesn't really matter. Downtown L.A. has added some 10-20 thosuand residence. That's super duper but oh yeah suburban Riverside county expects to add a 2 or 3 million residents by 2050

[VivaLFuego]

Guys, record gas prices aren't going to curb sprawl or force people to use transit. So there's no point in cheering on soaring prices. People will not go on trains, they'll simply pack up and move to cheaper cities or buy cars with better fuel economy, but they won't move downtown and ride trains.

Right. The most likely result is more efficient cars, be they smaller, hybrid, electric, or some combination thereof....it's what happened when gas mileage in the american fleet last peaked around the early 80s.

Densification is generally more of a function of relative land value (e.g. waterfront, CBD property, etc.), though in more isolated cases there may be some ego/pride factors involve (such as the Dallas/Houston downtown booms of the 70s and other major cities' "signature" megatall skyscrapers)

[PhxSprawler]

That's cute and all that our cities are increasing downtown populations but again it doesn't really matter. Downtown L.A. has added some 10-20 thosuand residence. That's super duper but oh yeah suburban Riverside county expects to add a 2 or 3 million residents by 2050


Yes, but at least downtown L.A. is becoming a desirable place to live. Sure, it won't stop the 3 million residents from moving to Riverside County and the ?? million from moving to San Bernardino County, but it's a start.

The availability of housing in desirable urban areas and the availability of public transportation will lead people to better decisions more so than the price of gas, and those two factors have greatly improved over the last few years.

[mhays]

Guys, record gas prices aren't going to curb sprawl or force people to use transit. So there's no point in cheering on soaring prices. People will not go on trains, they'll simply pack up and move to cheaper cities or buy cars with better fuel economy, but they won't move downtown and ride trains.

Some will choose to delete some discretionary trips, and/or drive more-efficient cars. Some will move closer to work. Some will turn down jobs that are too far away. Some will choose alternative fuels. Combine all of these and we can certainly conserve a lot. The only debate topic is what price level is required to convince a substantial number of people to do these things.

There's an obvious countertrend: if cost causes some people to drive less, it'll reduce traffic, which will encourage other people to drive more. Therefore, to reduce demand long-term, the cost effect has to be greater than the effect of this "induced" driving.

Of course, what's keeping prices high is demand staying up near supply. My scenario allows for the growing demand in other countries, offset by relatively stable supply. If supply starts to drop, prices will skyrocket much further, meaning the US effects I listed should come true even without increased foreign demand.

From an environmental standpoint, whatever oil we produce will be used, and it's less important where it's used. If Chinese and Indian use gains vs US use, that's probably bad, because their environmental controls are extremely lax in many regards. On the flip side, reduced use in the US would mean that in many ways our cities would be better off. More walking, biking, and transit use, and fewer cars on the road. Less roadside crap in rural areas. Etc.

[TexasBoi]

What about Houston, Phoenix, Dallas, and San Jose? Only sticking to the 10 biggest cities (not metros) in America, I would say all of these mentioned equal or surpass the excessive sprawl of San Diego and San Antonio.

I would also agree every single city in the top 10 has plans to improve its downtown area and increase its urban population- whether sprawling or not.

Well Houston and Dallas is doing exactly what alexjon is saying and San Antonio well, not really. At least Dallas and Houston are actually investing in mass transportation and there city centers.

[Buckeye Native 001]

Well Houston and Dallas is doing exactly what alexjon is saying and San Antonio well, not really. At least Dallas and Houston are actually investing in mass transportation and there city centers.

As is Phoenix, but we're taking a helluva-long time to get started.

[miketoronto]

Gas prices will do nothing about changing habits, because the majority of American's don't live in areas where there are alternatives?

How are American's suppose to hop on buses or trains, when even in Metropolitan areas, less then 50% have access to public transit services?

Second, the build form just does not allow alternatives at this moment. So people will not be changing habits anytime soon.

Also, as has been shown, you don't need high gas prices to change habit. Offer good public transit, and bike paths, etc, and people will not drive as much.

[Jon Dalton]

$3 a gallon is far from the turning point. Maybe $5 or $8 a gallon. When people will spend half of their income on cars and remain adamant that it beats the alternative, there is a ways to go yet before the price of gas affects driving habits at large.

[brickell]

Gas prices will do nothing about changing habits, because the majority of American's don't live in areas where there are alternatives?
How are American's suppose to hop on buses or trains, when even in Metropolitan areas, less then 50% have access to public transit services?



Wow. I agree with MikeToronto on something.
Most areas in the US don't offer alternatives. Most people will just bite the bullet because it's the only way they know. They'll cut back on vacations, on shopping trips, get better cars, but it'll never occur to them that the 30 mile trek to work is the main culprit.

[Attrill]

Yeah, I think we are a long ways off from changing people's habits at $3/gallon. There are so many intermediate steps that someone who is married to their car and hit by gas prices can take before using mass transit - starting with simply going from a 15 MPG car to a 20 MPG car.

We as a country are so inefficient in the cars we drive and build, and the way we live our lives, that it would take at least $10-$12/gallon to see serious support for building the mass transit options people need to live without cars.

[worldwide]

i hope gas goes to 20$ a gallon. im sure there will still be some stupid assholes that drive but its a start

[Trantor]

3$ a gallon if waaaay cheap, in some european countries the price is between 5 and 6 euros per gallon, you do the math.

I already said in Brazil the price is 5.31 per gallon. With 20% ethanol (means less kilometers per liter). And with a population with much less income than any european country.

Now you do the math! :)

[miketoronto]

You don't need high gas prices to get people to drive less. You need quality public transit :)

In places that offer good transit like NYC, Toronto, Chicago, Montreal, etc, people take public transit without being forced to with high gas prices.

But you gotta offer a good service. Same goes with any alternative, like biking.

[Gava]

I already said in Brazil the price is 5.31 per gallon. With 20% ethanol (means less kilometers per liter). And with a population with much less income than any european country.

Now you do the math! :)

The euro is currently worth at 1.4 dollar and was 1.5 dollars recently. That is 8-9 dollars per gallon. I don´t think high prices will be the end of suburbia, people still earn enough to commute. There was a TV program in Sweden a while ago about people commuting long distance and they happily commuted 150-200 miles every day by car with gas prices at about 8 US dollars per gallon.

[Trantor]

sorry, I didnt notice the currency was euro. Uh, anyway, Brazil´s per capita gdp is only 7500 dollars, so obviously, 5 dollars per gallon is TOOOOOO MUCH.

[dansk]

3 dollars will not be the breaking point. We are paying over $1USD/Litre in Canada. Will there be major changes in the US, yes. But it wouldn't be a breaking point.

[Nutterbug]

breaking point = more political instability and wars to come?

[SnyderBock]

Over the last year, gas prices have remained between $2.60 - $2.90 per gallon (where I live), despite oil prices remaining above $70 a barrow. With oil remaining well above $70 a barrow, it has made it economically feasible for oil companies to go back to USA abandoned oil drilling sites and start back up production. They have found these once used up oil wells have replenished themselves since being shutdown 15-30 years ago. This has resulted in more domestic production and higher profits for domestic oil companies and stable gas prices just under $3 a gallon, despite record oil prices.

Gas was at $2.70 a gallon back when oil was only $60 barrow. It's just more of it was being imported - which is expensive. Now oil companies are opening up the massive oil-shall reserves in the western USA which contains more oil than anywhere else on Earth. It is only economically feasible to extract when oil is constantly over $70 a barrow.

Therefore, we can turn rights to Middle Eastern oil (and all the problems that come with it) to China for their booming economy, and become oil self-sufficient with our massive coal, natural gas, and shell-oil reserves, but most importantly, our huge renewable energy potential.

We are a country of cheap energy and there is energy everywhere. We are surrounded by more energy than will ever be used. Technology will continue to help us unlock energy potential in ever more cost effective ways. It may be too late to stop global warming, but it's not too late to limit global warming. We all will like the Earth a little warmer place. After hundreds of millions of years of CO2 being locked up, the Earth was reverting back into an ice ball. It's natural state was historically a warmer place than today. A balance can be found which will benefit both man and Earth for it's longterm future.

[lfc4life]

people will still drive as much when its $7-8 a gallon as it currently is equivalent to in the UK, the traffic in london and on the motorways has not eased up one bit

its a bit like cigarettes, i bet if they were increased to $30 a pack people would still smoke as much, they would complain for sure but they would still smoke em

[Halifax Hillbilly]

Wow. I agree with MikeToronto on something.
Most areas in the US don't offer alternatives. Most people will just bite the bullet because it's the only way they know. They'll cut back on vacations, on shopping trips, get better cars, but it'll never occur to them that the 30 mile trek to work is the main culprit.

That's still a rather significant change in habits. People have gotten very used to hopping into the car for any discretionary trip no matter how unimportant. Cheap fuel, freeways and lots of free parking means driving is a tough habit for most people to get out of. Many automobile trips are not work related and I think too often we focus only on work related trips but if people are limiting their trips at all and demand for gasoline is flat or dropping slightly I think that is an important change.

I do agree that in many areas it will be tough to get people out of the cars for the big trip of the day during peak times. It will also be a long time before we might see any effect on the urban fabric. People will sacrifice a lot to enjoy the suburban life and it will take a long time to begin reversing fifty plus years of mass automobile suburbanization.

[ThrashATL]

People with five kids and a dog or two are NOT moving back downtown to a highrise. They move to another suburb to be closer to the their job but that's not practical these days as people change jobs so often.

[Mike K.]

i hope gas goes to 20$ a gallon. im sure there will still be some stupid assholes that drive but its a start

...and plenty of idiots taking $30 public transit rides.

Advocating for higher prices to teach drivers a lesson is like putting fire to your house to keep warm.

[glowrock]

...and plenty of idiots taking $30 public transit rides.

Advocating for higher prices to teach drivers a lesson is like putting fire to your house to keep warm.

Exactly, Mike K... What so many people here seem to fail to realize is that high fuel prices lead to high public transit fares as well, or an ever-larger government subsidy that will inevitably result in tax increases.

Either way, the poor and middle class have far less disposable income...

Aaron (Glowrock)

[J_Taylor]

http://www.bizjournals.com/pittsburgh/stories/2007/12/31/daily14.html?ana=from_rss

Over $100 USD per barrel.

Like others have said before, it isnt gas prices that will affect people. Its building qality transit systmes that take people where they want to go.

[mhays]

Exactly, Mike K... What so many people here seem to fail to realize is that high fuel prices lead to high public transit fares as well, or an ever-larger government subsidy that will inevitably result in tax increases.

Either way, the poor and middle class have far less disposable income...

Aaron (Glowrock)

Public transit uses fuel much more efficiently than driving alone. Price increases per ride should be pretty reasonable. That $30 ride must be on Greyhound from across the state.

[HoosierGuy317]

Carpool?

[i-215]

i hope gas goes to 20$ a gallon. im sure there will still be some stupid a**holes that drive but its a start

The other problem too is that we have trillions of infrastructure centered around the car - and it's not all bad. True: pollution, dependence on foreign oil, and land consumption are real concerns. But the honest truth is that America won't embrace mass transit until the infrastructure changes. And the grim reality is that it isn't going to be changing much for at least 50 years.

[dansk]

in Canada our www.carpool.ca is actually working quite well. Bus fairs are also on the rise between 60-75 per month on average.

[Mike K.]

Public transit uses fuel much more efficiently than driving alone. Price increases per ride should be pretty reasonable. That $30 ride must be on Greyhound from across the state.

Not necessarily. When gas cost $0.30/L in Victoria, bus fares were $0.75 for one zone. Now that gas is >$1.00/L, bus fares are $2.25. When we reach $2, would it make sense to expect fares of at least $3.00?

By the time gas reaches $10/L, I can only imagine bus fares will have risen substantially. Reason being absolutely everything we do is governed by the price of oil and as a result costs for everything increase exponentially.

[mhays]

You're kidding, right? Fares have very little to do with gas prices.

First, fares don't cover operation costs. Transit is subsidized, because it pays off many times over of course. Fares typically cover 25% or something like that. If a local government wants to keep fares the same for five years they can. If they want to ramp the 25% up to 35% they can, even if it's nowhere as simple as that.

Second, operations costs include other stuff like salaries, benefits, maintenance, real estate, and much else.

A quick look at some articles online suggests fuel might be in the 10% range of total system costs for a typical bus system.

[Cleveland Brown]

You're kidding, right? Fares have very little to do with gas prices.

First, fares don't cover operation costs. Transit is subsidized, because it pays off many times over of course. Fares typically cover 25% or something like that. If a local government wants to keep fares the same for five years they can. If they want to ramp the 25% up to 35% they can, even if it's nowhere as simple as that.

Second, operations costs include other stuff like salaries, benefits, maintenance, real estate, and much else.

A quick look at some articles online suggests fuel might be in the 10% range of total system costs for a typical bus system.

That's wrong. Public transit systems are funded two way, (1) direct subsidation from a direct sales or property tax, or (2) indirect subsidisation based on contribution from the state government. I happen to work for a transit authority that subsidises 70% of its budget from a county sales tax. When gas prices increase we're screwed from both ends. Our sales tax revenue decreases because people reduce spending on clothes, cars... On the other end, our costs increase because fuel prices not only increase, but violitility in the market makes it hard to budget for fuel prices. Fuel prices are a substantial part of our budget and other costs (wages) cannot contractually be reduced for union members.

Even transit systems funded by state governments get shafted too as their expenses increase. Guess where the state government gets the money to provide transit agencies money. In most states it's either a property tax (see Housing Bubble burst) or a sales tax (see reductions in consumer confidence, credit concerns, and rising unemployment). When both of those important streams dry up, guess what states cut before prisons, school funding (oh, the children :rolleyes: ), and medicaid/welfare... TRANSIT (see Chicago's problems getting funding from the state). In the US, federal money is little and primarily goes to earmarked capital projects.

So, when costs increase and the main revenue stream dries up, public transit agencies can only go to riders for more fare money when they can no longer cut operational expenses.

[mhays]

Gas prices affect fares, but there's no direct relationship.

Your financial model is specific to your city. The sources and percentages vary hugely from one state to another. Also, the ways an agency can react to higher fuel prices will vary from one state/city to another.

[kitchener-lrt]

In Ontario, gas is around $1-$1.10/litre, which still ends up being around $4/gallon. $3/gallon is cheap for gas.

[PhxSprawler]

Well, the point is this: demand for gasoline is falling in America. It may only be a temporary trend, but what is the cause? If it is not the hike in gas prices, is it the availability of pubic transit? Is it a change in automobile efficiency? The amount of telecommuters?

[LAofAnaheim]

^ Maybe people are tired of the anti-social behavior that comes with driving. You are stuck in a large metal box with 4 wheels alone. Unlike, when you take public transit, you can mix with people of different socio-economic backgrounds, races, cultures, etc... I think this generation realizes it a lot more than the previous. But, that's only one facet. Others would be traffic, cost of parking, gas prices, etc....

[edluva]

no, it is not the incresaed availability of mass transit, which is a drop in the bucket of american oil demand. it is just as someone stated earlier - high gas prices leading to people cutting down on indiscretionary driving.