Virginia’s Vulnerability to Gas Price Hikes

James A. Bacon

16 years ago

Oil prices have backed off from their recent highs, and I would not be surprised to see the price tumble back to $100 per barrel, maybe even lower, as speculators flee the oil futures market. But let no one be deceived: A new, higher plateau has been established for the price of oil. Demand continues to grow in developing countries, and cheap-to-access oil is being steadily replaced by expensive-to-access oil. I’m not one of those who frets that the world will “run out of” oil any time soon. But I can plainly see that petroleum will only get more expensive.

Unfortunately, I see little evidence that Virginia’s politicians peer past the short-term pain at the gas pump experienced by their constituents who — because the politicians insulated them from economic reality in the past — have failed to adapt to higher energy prices and, consequently, are paying a bigger price for their energy vulnerability than they would have otherwise.

As much as public policy has failed us here in Virginia, we have have plenty of company. A recent report by the National Resources Defense Council finds that Virginia is somewhat less vulnerable to rising oil and gasoline prices than other states. In other words, many states do worse.

“Fighting Oil Addiction: Ranking States’ Oil Vulnerability and Solutions for Change” ranks the states on the percentage of income spend on gasoline. Mississippi is the most vulnerable: Residents spend 8 percent of their income on gasoline. Connecticut, where residents spend a little more than 3 percent, is the least vulnerable.

Virginia is in the middle of the pack, rated 30th least vulnerable: 5.13 percent of our income goes to gasoline. We rank better than the national median not because we are especially conservation minded, however. Because we have higher-than-average incomes, our gasoline expenditures constitute a smaller percentage.

Stewart Schwartz, director of the Coalition for Smarter Growth, piggybacks on the NRDC press release with this quote:

The economic security of Virginia families and our Commonwealth will depend on greater energy efficiency in our buildings and communities. Since buildings and transportation constitute 75% of our energy use, green, efficient buildings in walkable, transit-oriented neighborhoods will be the best way for Virginia to be more energy efficient and help families save money. More than ever, smarter growth for Virginia is an economic imperative.

There should be vigorous debate on how we achieve “smart growth.” Should we rely upon market mechanisms, subsidies for mass transit, top-down land-use changes, or some mix of each? As readers of Bacon’s Rebellion know, I favor market solutions to the greatest extent possible. The NRDC praises states that support biofuels, state-sponsored R&D, mass transit and other forms of government activism.

Whichever approach you prefer, we’d be fools to do do nothing — perhaps in the blithe expectation that some miraculous technology will rescue us. Vehicles with superior gas mileage are surely coming. But we’ve been waiting for the miraculous technology rescue since the 1973 Arab oil embargo, and it still hasn’t arrived yet. Our energy economy is so complex, and the turnover of capital stock is so slow, that the miracle technologies will take many years, perhaps decades, to work their magic. Until then, Virginians will pay at the pump and suffer eroding standards of living.