Adjustments to gas prices

By Fester:

There are no significant short term policies that are both wise and capable of significantly lowering gas prices for this summer.  As I noted last week, the best policy right now is to do nothing much and let the demand destruction in the pipeline go through as people are looking and finding second best alternatives right now.  The Worcester Telegram is reporting that vehicle miles driven is falling off a cliff:

Overall, government analysts say, Americans have driven 2.1 percent fewer miles in 2008 than last year.

That may not sound like much, but it amounts to about 60 billion fewer highway miles, and has resulted in a decline in highway deaths, which stood at 15,840 nationwide through May, compared with about 17,500 in the corresponding periods for 2006 and 2007.

Calculated Risk is passing along the nugget that the decline in miles driven is accelerating.  This will have an interesting impact on infrastructure as the combination of fewer miles driven and more efficient vehicles means a whole lot less money is being collected by the gasoline tax. But that is another post for another day.

Economist View is passing along an extension of a previous thought about Cash for Clunkers:

Cash for Clunkers is a generic name for a variety of programs under which the government buys up some of the oldest, most polluting vehicles and scraps them....

A CLEANER ENVIRONMENT ... A California study estimated that cars 13 years old and older accounted for 25 percent of the miles driven but 75 percent of all pollution from cars

Alan Blinder goes off for a while on a couple of interesting tangents, but the basic idea is that there is a number of old cars that thereare very expensive and very inefficient to drive and operate, but due to individual liquidity constraints, they are not being replaced.  There are a couple of problems with this program that would have to be worked out.  For a good chunk of high school, I was driving a 1985 Chrysler New Yorker (thankfully gas was never more than $1.30/gallon then) which was registered in my parents' name.  As an environmental measure, that car should have been targetted for junking.  However as an economic stimulas measure, buying out the 3rd or 4th car in the family has some massive system wide equity issues.  Why should families who can afford a 3rd or 4th car receive a subsidy to buy a superior replacement vehicle? 

But right now, the major adjustments that can be made to high gas prices will occur irrespective of any policy or position that is being debated in Congress or signed by President Bush.  We should (barring another Katrina/Ivan storm) see some relief come October and November due to seasonality factors, that is about all we can expect. 

A CLEANER ENVIRONMENT ... A California study estimated that cars 13 years old and older accounted for 25 percent of the miles driven but 75 percent of all pollution from cars

Alan Blinder goes off for a while on a couple of interesting tangents, but the basic idea is that there is a number of old cars that thereare very expensive and very inefficient to drive and operate, but due to individual liquidity constraints, they are not being replaced.  There are a couple of problems with this program that would have to be worked out.  For a good chunk of high school, I was driving a 1985 Chrysler New Yorker (thankfully gas was never more than $1.30/gallon then) which was registered in my parents' name.  As an environmental measure, that car should have been targetted for junking.  However as an economic stimulas measure, buying out the 3rd or 4th car in the family has some massive system wide equity issues.  Why should families who can afford a 3rd or 4th car receive a subsidy to buy a superior replacement vehicle? 

But right now, the major adjustments that can be made to high gas prices will occur irrespective of any policy or position that is being debated in Congress or signed by President Bush.  We should (barring another Katrina/Ivan storm) see some relief come October and November due to seasonality factors, that is about all we can expect. 

Comments

[Jimmy]

I found an interesting site, while online that boasts a new service that offers fixed price gasoline. The company is GasBankUSA and their website is http://www.gasbankusa.com