Transit Up

Via Atrios, we learn that people are price sensitive:

With the price of gas approaching $4 a gallon, more commuters are abandoning their cars and taking the train or bus instead.

Mass transit systems around the country are seeing standing-room-only crowds on bus lines where seats were once easy to come by. Parking lots at many bus and light rail stations are suddenly overflowing, with commuters in some towns risking a ticket or tow by parking on nearby grassy areas and in vacant lots.

The question is: What happens next? What really shouldn't happen is for politicians to run around talking as if expensive gasoline is a temporary phenomenon. Responsible leaders will tell people that prices will fluctuate, but that as long as the Chinese and Indian economies keep growing, the general trajectory will be upward. Then they should sympathize with people who would like to take transit, but find it prohibitively inconvenient and with people who've just started taking transit and are finding it annoying and they should commit to making transit better and more available.

Alternatively, you could act like southern Florida and propose steep service reductions on your commuter rail system. But that'd be crazy. Jurisdictions with existing commuter rail lines need to make service more frequent. With transit, you can get into good equilibria and bad equilibria. On the good path, you have tons and tons of people who want to ride your line and as a result service is very frequent so as to accommodate all the traffic. And because service is so frequent, lots of people find the line convenient to use. On the bad path, infrequent service leads to low ridership which leads to infrequent service which leads to low ridership.

Comments

I like the theme of today's posts:

Logical conclusions.

Posted by Sid | May 10, 2008 10:47 AM

So I've seen congress invite Big Oil to capital hill to ask what the plan on doing to create renewable resources?

WHY are we giving renewable taxpayer money to people who have absolutely know incentive to change the money making ways. They are already monolithic, deregulated monopolies – so I don’t want to give one red cent to Big Oil to develop new technology, since whatever idea they achieve would only be another develop that they would horde and cut production on in order to control that idea too.

Why is congress giving these already grossly over-charging companies control of taxpayer money that will eventually be misused and cause the nation to go into bankrupty. Big Oil's greed is boundless.

Posted by me-again | May 10, 2008 11:20 AM

Everything in South Florida is crazy.

Posted by brenna | May 10, 2008 11:33 AM

Re: Alternatively, you could act like southern Florida and propose steep service reductions on your commuter rail system.

The problem here is that the Florida legislature failed to provide dedicated funding for Tri-Rail. Not because anyone was particularly opposed to it-- support was quite high and the fairly rightwing House had voted in favor without a single vote opposed. No, the trouble (as usual) is that the legislature waited until the last minute to pass a budget and amid the usual clash of petty tin gods with big egos all sorts of things were simply left undone as the legislators rushed off to summer vacation like grade-schoolers when the final bell rings in June.
By the way, gas is quite likely to fall back below $3 a gallon (assuming no further devaluations of the dollar), probably in late summer or early fall. Still quite high, and subject to further price spikes (e.g, from Gulf hurricanes, more Mideast troubles etc.) But the bubble will burst. All bubbles do. However the days of $1 gas are gone, long gone, and for good.

Posted by JonF | May 10, 2008 11:40 AM

South Florida is not isolated in its attitudes. There really is a cognitive gap in the American conscience. Folks just simply don't believe that the party's over and they vote that way. So we'll continue to borrow money from China and hand it over to Saudi Arabia by the truckload until we can't anymore. Dick Cheney said the American way of life is not negotiable. Its becoming more and more apparent that the American way of life is, sadly and ironically, tantamount to treason.

Posted by RoboticGhost | May 10, 2008 11:52 AM

By the way, gas is quite likely to fall back below $3 a gallon (assuming no further devaluations of the dollar), probably in late summer or early fall.

Why?

Posted by Ed Marshall | May 10, 2008 11:53 AM

It's hardly as simple as you seem to think. Take the greater DC metro area, outside of DC. Even on the Washington Beltway, transit is mostly inconvenient. Beyond the beltway, it's completely impractical. The reality of this area (and many others) is that neither jobs nor workers are centralized. Transit works great when you have a mass of people to move from A to B. It works a lot less well when you have people spread out all over, heading to disparate jobs that are also spread all over.

Posted by James Robertson | May 10, 2008 11:59 AM

More on the price sensitivity front, used SUV values are way down as people try to dump them and aren't finding buyers.

Posted by AJ | May 10, 2008 12:05 PM

James, you are correct. It's much more complex that anybody thinks. All those people who live in decentralized suburbs and small towns have two options at this point: move or become self sufficient somehow. We are a nation of specialists that need to congregate to conduct business, socialize, eat, etc... For the past 60 years or so, we've structured our lives based on the fact of cheap oil and the ubiquity of personal automobiles. That scenario is becoming untenable very quickly. We need to centralize living and workplaces in order to live. Its a weird idea, but what alternatives are there?

Posted by RoboticGhost | May 10, 2008 12:21 PM

JonF, there is nothing to indicate that oil prices or gas prices are a bubble or will drop precipitously any time soon. Big U.S. companies are budgeting for oil at $130-$140 a barrel in 2009, for instance.

Posted by TH | May 10, 2008 12:27 PM

JonF is sort of right. Commodity bubbles always do burst. The real question here is how much of this is a commodity bubble and how much is is profit taking to hedge against peak production and how much is attributable to a new market dynamic where China and India want more gas? Say a percentage of the value of oil does pop in the fall and gas sells for $2.99 for a while. How long? And given the critical character of oil as a commodity, what's to prevent a long series of bubbles that get progressively worse? It certainly isn't going to get any better. This is new territory for us upjumped chimps. We've never faced anything like this. Its almost as if the sun started shining less and less each day in the summer.

Posted by RoboticGhost | May 10, 2008 12:37 PM

I was told last night that the local bus system in Lawrence, KS (college town, pretty good bus service for a town of ~70K population) is in trouble because it costs too much. You know, fuel costs going up and all...

Posted by PW | May 10, 2008 12:45 PM

This is new territory for us upjumped chimps. We've never faced anything like this. Its almost as if the sun started shining less and less each day in the summer.

This statement is almost a leading indicator for a bursting bubble. The instant someone says, "Oh, it's different now," is right when things revert to previous patterns.

Posted by Tyro | May 10, 2008 12:52 PM

Tyro, I suppose you're right. This really isn't unprecedented. There's always Easter Island. That's a relevant precedent here, I suppose. What happened when the tree bubble burst?

Posted by RoboticGhost | May 10, 2008 1:06 PM

Mr. Y's nightmare: homemade ethanol for a dollar a gallon

The MicroFueler, which is about the size of a gas station pump, will sell for $9,995 and start shipping late in 2008. E-Fuel´s founders Floyd Butterfield and Thomas Quinn expect that government incentives for alternative fuels will reduce the initial investment by up to $5,000.

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The MicroFueler uses sugar as the main fuel source, which is mixed with a time-release yeast the company has developed. E-Fuel explains that it takes about 10-14 pounds of sugar to make one gallon of ethanol. When using store-bought sugar, which costs about 20 cents per pound in the US, plus the cost of electricity, the cost to produce a gallon of ethanol would be roughly equivalent to today´s gas prices in the US.

However, Butterfield and Quinn note that inedible sugar can be bought from Mexico for about 2.5 cents per pound under the North American Free Trade Agreement effective this past January. Then it could cost as little as a dollar a gallon to produce ethanol with the MicroFueler. Quinn also noted that he´s used leftover alcohol as an alternative feedstock to sugar, and the only cost is for the electricity.

Posted by Linus | May 10, 2008 1:09 PM

"For the past 60 years or so, we've structured our lives based on the fact of cheap oil and the ubiquity of personal automobiles. That scenario is becoming untenable very quickly. We need to centralize living and workplaces in order to live. Its a weird idea, but what alternatives are there?"

I live in a Maryland suburb, where nothing is walkable. And yet, I drive less than 6000 miles per year. I work out of the house, and I do most of my meetings by phone and/or skype. Most of my travel is by plane, not car.

A lot of people in my neighborhood work that way as well. We aren't going to return to a centralized, 1950's era world - it's going to be a hybrid, and we are going to have to live with the suburbs we have. Expecting millions to return to the cities when the school crime issue there is as bad as it is (scan Baltimore news reports for an idea) is just insane.

Bottom line: no suburbanite with kids is going to move into a city with high crime, dangerous schools, and high local taxes. Nor are they going to move into safer ones like NYC, because they simply can't afford to. We have what we have.

Posted by James Robertson | May 10, 2008 1:14 PM

Linus falls in the trap of thinking that the home science lab model easily extrapolates from One Guy's Garage to the entire American population. There will be localisation of energy needs, though you're likely to see more people ripping up their status-symbol lawns for productive gardens.

Bottom line: no suburbanite with kids is going to move into a city with high crime, dangerous schools, and black people.

Fixed yer typo there, Jim-Bob.

Posted by pseudonymous in nc | May 10, 2008 1:54 PM

I live in Denver, and the article isn't kidding--the light rail and many bus lines are apcked during rush hour. I can't remember the last time I got a seat on the train.

Course it's worth it. Total gas and parking costs per month are running less than $100 for our family of three.

Posted by Joe | May 10, 2008 2:25 PM

Re: Why?

Because the current run-up in prices is due to a speculative bubble, not unlike the recent housing bubble. Now that housing has gone bust (and the dollar is crap) investors are pouring money into commodities instead. But bubbles never last forever. Ask the unemployed loan agents from New Century Mortgage Corp about that one. Meanwhile, every analysis I've seen (with hard numbers crunched) puts the supply-and-demand cost for gasoline in the USA somewhere in the high $2/gal range. Why is that so hard to believe? Right before the housing bubble burst and before the Fed started driving down the dollar, that's where gasoline was. Nothing has changed on either the supply or demand front in the last few months (i.e., China and India were demanding oil six months ago too), it's where gas was more or less forecast to be at before the speculators showed up at the door.

Re: All those people who live in decentralized suburbs and small towns have two options at this point: move or become self sufficient somehow.

Why not find jobs closer to home? When I was growing up the 70s (in a city on the edge of Detroit suburbia) more than half the people on our block had jobs within five miles of home. Most of the rest had commutes less than 10 miles. My father's commute of 18 miles was the longest one I know of. No, everyone cannot live within walking distance of work, and not everyone can live where there's public transportation. But a five mile drive to work would be doable even with high gas prices.

Re: Big U.S. companies are budgeting for oil at $130-$140 a barrel in 2009, for instance.

Actually they are predicting that the price of oil will collapse sometime late summer or early fall. And I don't know where you've been but every solid (=hard numbers) analysis out there tells of a speculative bubble. Good grief, why are people here so blind? Left-leaning folks are usually the first to smell this sort of financial shenanigan and call it. Why the blindness on gas prices? Remember what happened in September of 2006? An obscure investment tax law was changed and the price of gasoline dropped fifty cents in about two weeks, leading to widespread suspicion that someone was trying to influence the election. The Left should be out in force on this one. It's tailor-made for them, leftwing populism that would find a huge audience and could win elections. And since in the world's poorer countries people are starting to starve because of these manipulations, for once I'd be happy to join the Jacobin mob.

Re: Say a percentage of the value of oil does pop in the fall and gas sells for $2.99 for a while. How long?

Probably for a long while-- if we assume A) currency stability in the US and B) Mideast tensions defuse not escalate (i.e., John "Bomb Iran" McCain is retired to private life in November). Demand for oil has been going up steadily for decades (and supplies have been growing less as oil is pumped). China and India's demand are grossly exaggerated by many people: only a tiny fraction of people in those countries can afford cars; most are dirt poor peasants who can barely afford a water buffalo, and nothing is going change that in the future, not even the not-so-immediate future. Of course there will ups and downs: hurricanes, wars, and rumors of wars. But there's no reason rough price stability should not be achieved.

Re: what's to prevent a long series of bubbles that get progressively worse?

Once people get burned by a popping bubble, they tend to be shy of it for a long time. Anyone think housing (another absolute necessity of life) is going to start inflating again soon?

Re: We've never faced anything like this.

How old are you? I'm 41, but I can recall the 70s from my childhood when we didn't just have spiraling prices, but also gas lines and shortages. I also recall hysterics screaming that by 1985 we would all be freezing in the dark.

Re: There's always Easter Island

Jared Diamond got Easter Island wrong if that's what you are referring too. He took it almost verbatim from some old racist anthropologist's account of its demise. In fact, Easter Island retained a viable and prosperous culture until Europeans started to visit and share their diseases-- and then the slave-takers showed up from Peru and everything really went down hill. Unless you think little green men are going to come calling and leave behind the Martian Death while hauling our young and nubile people away to servitude on Planet Zoz, Easter Island has no lesson for us.

Posted by JonF | May 10, 2008 2:38 PM

If I were King:

Gas prices would continue to go up via a schedule over several years, with taxes used to do so when the natural market forces are inadequate to maintain the momentum.

Gradualism in the price escalation would give people time to make their adjustments or settle on their "sacrifices" in order to maintain current consumption habits.

The taxes collected this way would go into a separate "lock box" (Thanks, Al) and be used ONLY to help fund government initiatives at various levels (cities, regions, states, the whole country) to help us end our outrageous levels of gasoline consumption. Some of these would be "experimental" and some of these would be public policy matters.

See, it's not that hard. Step 1 is to admit that gasoline is an incredibly good "value" right now even at price levels we see as high (historically), and when that mindset changes, then behavior and policy changes will follow.

This needs to be a national priority with all the communication and patriotic overtones we can muster in this "me first" era. Like the "man to the moon" quest of decades ago.

Posted by Terry Ott | May 10, 2008 3:06 PM

pseudonymous in nc said:

"Bottom line: no suburbanite with kids is going to move into a city with high crime, dangerous schools, and black people."

Notice (scroll up) that I said nothing about race. What I said was, the schools in many cities (Baltimore being a leading one this way) are dangerous. I don't care what race or ethnicity the population is, I care about the safety. I wouldn't move to Baltimore under any circumstances based on the safety issue. Race has nothing to do with it.

Posted by James Robertson | May 10, 2008 4:08 PM

Re: The taxes collected this way would go into a separate "lock box" (Thanks, Al) and be used ONLY to help fund government initiatives at various levels (cities, regions, states, the whole country) to help us end our outrageous levels of gasoline consumption.

While I could be persuaded on energy taxes, I would use them to fund a $10,000 exemption to the payroll tax, so as not to unduly burden lower income people or contribute to income inequality.

Posted by Jonf | May 10, 2008 4:19 PM

does any public transportation system operate at a profit or even break even on its costs? if no, then aren't we seeing public vs private, taxpayer vs consumer/investor competition break out here? why isn't there instead a private market in non-automobile transportation?

Posted by rod | May 10, 2008 5:59 PM

One problem with the vision of bursting oil bubble is that indeed, there was a bubble that burst very spectacularly during 90s, and major oil producers learned not to succumb to temptation to increase their production just because prices are high.

On top of it, OPEC, Russia and Kazakhstan have to much money and not enough vehicles to invest reliably. So they do part of their savings by keeping oil in the ground. From outside it is described as bureaucratic bungling, irrational behavior etc. The head of a major Russian company complained that the export taxes are so high that they throttle the necessary investment to maintain the size of production, let alone expand. But Russia does not need to expand oil production! Kremlin is perfectly rational. And so is Venezuela, and so is Saudi Arabia etc.

Outside OPEC there are places with quickly increasing production, say Brazil, but just enough to be quickly gobbled by increased demand from East and South Asia. And it is not just China and India, but also a slew of other growing economies with an aggregate population of 500 million.

The only thing that could seriously dent the bubble is if the West would show larger price flexibility. Europeans already have much smaller cars, and much higher use of alternative modes of transportation, and they can easily afford the increased cost -- it is a lesser portion of their budget, even with prices that are 2.5 times higher. Americans still think that they can wait with major decisions to cut oil consumption. So Western demand drops rather slowly.

In the meantime, Middle East oil producers have rapidly expanding population, maintain low internal prices and their own consumption grows quickly too.

Posted by piotr | May 10, 2008 6:35 PM

Matt is forgetting these are the Bush years, and in the Bush years what happens next is, obviously, a rule that public transit agencies can't provide special "Game Day" bus services.

Now, if you read the fine print, you find public transit can offer these services if there are no other bids, but if you read even more of the fine print, you find they would be foolish to do so and risk losing all of their federal funding.

So all of the years of work that have gone into creating a transit-rich environment for large crowds will be flushed down the toilet so a few Bush contributors can make some profits. Of course, the private sector has never delivered the goods on this kind of service since the demise of the streetcars, so after a few years there will be no service.

Unless we do something about it politically. It's time to dump the system where the public picks up the bill when the service is losing money, and "private enterprise" picks up the profits after the public rebuilds the service.

Posted by serial catowner | May 10, 2008 8:11 PM

Rod, while private enterprise can play a big role, most infrastructure projects of this sort cannot be a solely a private venture. Aquiring land, arranging contracts between municipalities and so on are tricky and easier for governments to do. Counterintuitivley, government can do it cheaper to boot. Some things can't operate at a profit but are still good to have. The Marines are a useful example. Moving goods and people around is necessary, even if nobody is directly making a dime on it. That having been said, there is plenty of room for private firms and citizens to make money from infrastructure projects. We built the highways at a loss but made a lot of folks rich in effect. Airports too. Now its time to let those things go the way of the blacksmith and pony express. The death of the personal automobile is, on one hand, a pain in the ass; on the other its an opportunity.

Posted by roboticghost | May 10, 2008 11:05 PM

Question: why isn't there instead a private market in non-automobile transportation?

Answer: because, technically speaking, there isn't a private market for automobile transportation. All the roads and highways that cars use are subsidized by taxpayers. There are no privately owned for profit highways and roads in this country, so why would there be a privately owned mass transit line?

Though to be fair, there once were privately owned non-automobile transit in this country. The original infrastructure of Chicago's L, for example, was built by private companies.

Posted by freddiemac | May 11, 2008 10:59 AM