Scott Bernstein

$4 per gallon gas

President of the Chicago-based Center for Neighborhood Technology, Mar 28, 11.

Tagged with transportation, urban planning, transit, economics

With some regularity and predictability, Americans begin driving more in late spring, putting pressure on gasoline supplies and prices. Summer 2008 was a watershed moment: gasoline prices topped $4/gallon. Here in Chicago we’re rapidly approaching yet another defining moment. Gas prices increased a whopping 36 cents in the two weeks between February 21 and March 7, although the average price has hovered around $3.72 since then.

We last experienced $3.72/gallon gasoline on April 21, 2008, so in a sense we’re running at least a month ahead of the 2008 price run-up. Lessons from that price spike offer constructive insights about how Chicagoans might avoid the effects of high gas prices this time around and into the future.

Between July 2000 and July 2008, the average price of a gallon of gas increased from $1.99 to $4.30 in the Chicago area, increasing three times faster than the cost of housing and six times faster than the region’s area median income. The price spike cost the Chicagoland economy—its families and businesses—billions of dollars, with little benefit. We don’t produce petroleum or gasoline in Chicago; we consume it. We do tax it, but that tax is a flat per-gallon amount (and has remained the same for decades), so price increases don’t do us any good. Chicagoland’s households consume 2.4 billion gallons of gasoline per year. Each penny of price increase costs us $24 million; each dime $240 million; each dollar $2.4 billion; and so forth.

The current rapid increase in gas prices has prompted talk of opening the nation’s Strategic Petroleum Reserve, but this will at best buy us a couple of months nationally, with no assurance of relief here. The best long-term response to rising gas prices is to reduce demand for gas. President Obama spoke about reducing demand in a press conference last week and the need for more fuel-efficient cars. Increasing the energy efficiency of our cars is important, but equally important is the need to reduce the number of miles we drive…

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Source: Planetizen, March 21, 2011

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