It’s amazing how, in just a year or two, energy issues have pushed themselves to the forefront of the Virginia public policy agenda. Electric power… offshore drilling… transportation and gasoline consumption… Climate change and conservation… It’s equally astounding how little lawmakers’ thinking has actually changed.
Energy policy was quiescent for more than two decades following the collapse of oil, coal and natural gas prices in the early 1980s. Virginia lawmakers were somnambulant, spending billions of dollars yearly on a transportation system designed around the premise of cheap energy. Even as soaring oil costs simultaneously (a) push up the cost of laying asphalt on new roads and highways and (b) depress demand, only a small number of state legislators appear willing to rethink transportation policy in a fundamental way.
The contours of the transportation debate have changed little since petroleum was selling at $20 per barrel in 2002: There’s nothing wrong with the system that more revenues and more construction won’t fix. What passes for enlightened thinking today is the idea that instead of just throwing money at roads, we now need to throw money at roads and transit — but without enacting the land use reforms required to make transit work.
It was only last September when I was blogging about the impact of oil at $100 per barrel. (See “Quality of Life, Human Settlement Patterns and $100 Oil.”) Not long ago, the price busted through the $150 per barrel level. What will it take to change attitudes? Oil selling at $200 per barrel? $250?
I came across a short piece written by Jeff Rubin with CIBC World Markets. Demand in China and other developing countries continues unabated, often stimulated by subsidies, he writes. Recent Saudi promises to increase oil production by 200,000 barrels per day are meaningless compared to the four million-barrels-per-day decline in oil production expected for the rest of the globe this year. Meanwhile, supplies are restricted in oil-producing regions by under-investment in nationally owned oil companies (Venezuela, Mexico), political instability (Nigeria) or environmental restrictions (the United States).
Rubin projects oil selling at $200 by 2010, only two years hence, which, under prevailing refinery margins, will translate into $7-per-gallon gasoline. He continues:
As gasoline prices climb inexorably, American driving habits are going to have to undergo a massive change, mimicking the driving habits long adopted by Europeans who have faced much higher gas prices. Average miles driven will likely fall by as much as 15%, while the market share of light trucks, SUVs and vans will be literally halved, reversing the trend of the last fifteen years. But the most fundamental, and unprecedented change will be in the number of vehicles on the road.
Over the next four years, we are likely to witness the greatest mass exodus of vehicles off America’s highways in history. By 2012, there should be some 10 million fewer vehicles on American roadways than there are today — a decline that dwarfs all previous adjustments including those during the two OPEC oil shocks. … Many of those in the exit lane will be low income Americans from households earning less than $25,000 per year. Incredibly, over 10 million of those American households own more than one car.
Soon they won’t own any.
Let me repeat a couple of key phrases: Average miles driven will fall by as much as 15 percent…. We are likely to witness the greatest mass exodus of vehicles off America’s highways in history… Soon, some 10 million poor American households might find themselves unable to afford a car…
The debate over transportation funding is based on the same assumptions that underpinned the Warner-era VTrans2025 study, which listed $108 billion in “unmet transportation needs” over the next 20 years based on anticipated population growth and vehicle miles driven. To persist in such a debate in the face of soaring oil prices is breath-taking folly.
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