4/14/2009

The Future of American Roadway Maintenance Unclear

I came across on article entitled “Oil Industry Braces for Drop in U.S. Thirst for Gasoline” in the April 13 copy of the Wall Street Journal. The article explains that since the introduction of the mass-produced Model T nearly a century ago, U.S. demand for oil has been on the rise until now. The article claims that many of the oil industry’s most prominent members including Exxon Mobil Corp., believe that U.S. gasoline consumption has peaked and will never again attain such levels. The U.S. Energy Information Administration reports that American drivers consumed 371.2 million gallons of petroleum-based gasoline a day in 2007 and that this figure is expected to decline in 2009 to 345.7 million gallons daily. One might say the current recession is to blame for decreased gasoline consumption which is essentially true but Americans have begun to alter their lifestyles as well. Americans have recently made a concentrated effort to decrease commuting distances and driving overall as gasoline prices skyrocketed as recent as last summer. Those deeply involved in the industry believe that even after the economy strengthens, gasoline consumption will never again reach the levels it did in 2007 due to the emergence of biofuels and more energy efficient vehicles such the hybrid. One might additionally argue that certain policies promoted by the Obama administration are fueling the energy revolution and thus will have a decreasing impact on overall gasoline consumption. While this trend is generally regarded positively as a step in the right direction, concern has risen regarding the tax revenue that gasoline consumption supplies. The article notes that federal gasoline-tax revenue fell 3% last year and that the trend must inevitably continue as consumption declines. This reveals a major concern that needs to be addressed. What is the future of America’s highways and roads that are currently funded primarily by gasoline-tax revenue? How will the United States maintain and repair its massive highway system as funds decrease? One suggestion is to tax drivers per mile driven rather than by the gallon to incorporate the use of biofuels and more energy efficient vehicles but how would such a policy be enacted? Would one have to report miles driven annually with your income taxes? In my mind such a policy seems implausible, but I can’t think of any alternatives. Are there any better suggestions? How can America continue to contribute to the Highway Trust Fund as gasoline-tax revenues decline?

5 comments:

Caleb said...

I don’t think that U.S. oil consumption has peaked or that we will continue to see a drop in gallons of gas used per day. You can see that right now, of course, but like Prof. Tufte said, people tend to forget about recessions very quickly. With gas right now at about $2.00 a gallon and the prices of big SUVs and trucks at all time lows, I think the popularity of the gigantic vehicle will return. Yes, some will continue on in their current “greener” state and continue to drive hybrids, but I bet a large portion will go back to doing things the old way. After all, my Jeep gets only about 15 miles to the gallon, and I love it; and I plan on eventually replacing it with a new kind of Jeep, which only gets about 18 miles to the gallon. As driving increases, the tax revenue will increase, and things will be back to normal.

Calvin said...

So first of all the idea of having to report miles driven is ridiculous. The odometer on my Honda doesn't even work! And what about the miles I put on my 4 wheeler? should I report that? Yeah it sounds stupid. I personally enjoy having a large truck to get around. I use it all the time and it's not only more useful, it's more practical! With gas prices where they are it's easy to fill my 21 gallon tank without wondering if i'm gonna have enough money left over for food. We'll never see prices like we did last summer so i'm not worried about it.

Tristan said...

I agree with Caleb that surely some people will return to their gigantic vehicles as gas prices remain relatively low and the economy recovers. I can empathize with this trend as well, I love driving my gas guzzling truck too, but considering the nation as a whole, I believe we are becoming more energy conscious and though some effects the recent “going green” trend may disappear post recession, I do believe we have made significant advances in fuel combustion technology. After all, we have been employing the same technology to run our vehicles for about a century; with all our advanced technology can’t we find some other reasonable alternative to burning fossil fuels to get us from here to there? Caleb is right that consumption may not have peaked but I believe we are very near as we are literally on the verge of implementing more efficient technology.

Tristan said...

A possible counter-peak argument is mentioned in the article highlighting the effect of population growth on gasoline consumption. The argument is that gasoline consumption must increase as population continues to increase. This is a strong argument but one must remember the population growth rate in the United States is only about 1% and may not be enough to compensate for the overall decrease in consumption.

Dr. Tufte said...

I read this piece. It's dreck.

The ultimate conclusion is probably OK. But the underlying reasons stated are self-serving.

No one "cares" on a significant level about commuting distances, energy efficiency, alternative fuels, hybrids, or what have you.

What they do "care" about is prices. Gas prices are likely to go back up again and stay up. The reason is that big parts of the world are no longer impeded from growing.

The British have a phrase for this: too clever by half. It means that you've focused so much on the secondary things that you've forgotten about the primary one. In this case, we don't start out in principles talking about the "elasticity with respect to commuting distances, or alternative fuels". We start out talking about elasticity with respect to prices. Don't forget that.