Quote:
Originally Posted by drpgq
I read somewhere (unfortunately I can't remember, I'll have to hunt for it) that the number of miles driven in the US is only down a measly 1% year over year.
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The distance driven dropped 5% from 2007 to 2008, and is down again slightly in 2009, despite the relative respite in fuel prices.
Of note, however: despite the sharpest, deepest global recession since the Great Depression, oil is still trading around $60/barrel. When all the bajillions of dollars in Keynesian counter-cyclical spending kick in and the economy recovers, oil prices will skyrocket again. I wouldn't be surprised to see oil hit $200 by the peak of the next price swing.
Incidentally, the absolute best thing we could do across North America would be to impose a fairly stiff gas tax. This may sound counter-intuitive, but please read on:
High,
volatile oil prices are bad for everybody: bad for consumers (personal and corporate) because it's difficult to budget for fuel expenses when the price swings 150% over a six month period; bad for producers because they can't get the stable demand necessary to justify investing in expensive, non-conventional sources; and bad for the economy as a whole by fomenting instability in secondary and tertiary industries.
High,
stable prices are much better. A tax accomplishes several things at once:
1. When tax is a bigger share of the total price of fuel, swings in the price of oil have a smaller impact on the overall price.
2. When consumers come to expect a reasonably stable high price, they're more willing to adjust spending decisions to take those prices into account.
3. It's long been understood by economists that high energy prices drive innovation in fuel efficiency that more than offset the higher cost. For example, Europeans pay double what North Americans pay for fuel, but drive about as much as North Americans do (17,000 km/year in Europe to 18,000 km/year in North America) while consuming only half as much energy per capita. It's no coincidence that the best-performing cars and the most consistently profitable car companies in the world have their home bases in countries with very high fuel prices.
4. Over time, high prices push the economy as a whole toward reduced reliance on oil, which means volatile swings in the oil price and even supply disruptions have less capacity to disrupt economic activity.
The auto industry understands this. In recent months we've had the CEO and Chairman of Ford Motor Company both point out that the price of gas in the US has to double so that the auto companies can make a living selling small cars.