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Wednesday, May 10, 2006

Speaking of $6-a-Gallon Gas…

Posted by on May 10 at 13:06 PM

Expensive gas isn’t enough to keep many Americans from moving out beyond the exurbs—way beyond, according to this story in Sunday’s NYT.

According to the story, formerly remote rural places like Blairsville, GA (80 miles north of Atlanta), Milaca, MN., 60 miles north of Minneapolis, and Vilas County, WI, 220 miles from Milwaukee, are growing rapidly, even as urban areas lose residents. The logic, according to the story, “is not obscure,” even for those who face commutes of more than 100 miles. “The new destinations are precisely the places, like Archer County, that have been undervalued — whether by industry or agriculture or mass leisure or urban flight. They are the places where you can still get something that feels like a good life, without the salary of a chief executive.” Amanda Peterson, a 27-year-old machine shop worker in Minneapolis, justifed her 120-mile round-trip commute from Milaca thus: “We saved forty to fifty thousand dollars on a house, and that buys a lot of gas.”

The story, like coverage of Midas’s “America’s Longest Commute” contest (the gas-guzzling winner, a man who drives 372 miles round-trip between Mariposa and San Jose, CA, every day, got $10,000 in free gas), ignores the huge environmental impact of such a car-dependent lifestyle choice, though it does mention one possibility that could end the alarming ex-ex-ex-urban migration: Gas prices, already over $3 a gallon, could continue to increase, “stop[ping] the American movement from spreading farther out.”


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In fact you'd expect that high gas prices would even in theory increase not decrease urban flight. American demand for gasoline is relatively price-inelasitic. What responsiveness there is between price and demand happens because high prices impact income. When prices get high enough they start cutting into disposable income and eventually that forces structural changes in the way people get about.
The same income impact of high gas prices makes the move to the suburbs more likely, because high gas prices mean lower income that can be used for house payments, and thus make it harder to go anywhere else.
What's odd is that it seems that a move to the suburbs is less of stretch from the status quo than simply cutting out driving. That says a lot about how significant the change from car to public transit travel is in this country.

I used to babysit for a man who commuted from bellingham to seattle daily. I spent more time in his house than he did.

Hey. if you look at my end of year predictions, I predict we'll have $100.00 per barrel oil at the END of the year
with a 50% chance of going to 90/barrel by end of august!

Sorry to be the heavy.
Link is above
Cheers.
Markbnj

Ms. Peterson should think through the math when she says that the $40,000 they saved on the house can buy a lot of gas. If you work out what that commute is costing her, it won’t take long for the scale to tip in the other direction. If you use the federal mileage rate as a basis for her actual cost, plus federal minimum wage for the time spent on the commute, the commute costs her more than $16,000 per year (and that’s based on the unrealistic estimate of 2 hours for the 120 mile commute). And it doesn’t factor in the detrimental affect road rage may be having on her health. In less than three years, she’s used up the savings from the house.

But that’s the nerdy way of looking at it. The impact on the environment is astounding, as is the affect on her quality of life.

I feel bad judging someone’s life choices, and totally understand the attraction of owning your own home. But it seems like the justification is so short-sighted.

Reading between the lines: expensive gas does not mean that less will be bought.

Americans feel it is there right to spend their money anyway they want. And why not? It was earned, or at least it belongs to them even if they did work for it. Oftentimes that money is spent wisely. Sometimes it is spent foolishly. Problem is though, like another post sort of pointed out earlier today with cigarettes, just because something is expensive (like gas or cigarettes) but is plentiful (like gas or cigarettes), doesn't mean people will stop buying it. They stop buying for other reasons, but very few people will stop buying gas or cigarettes because the other guy has a (cough, cough) problem with it.

Sure, it can be fun to engage in collegiate hypothesizing about the environmental impact of the use of those items (like gas or cigarettes). Now, lets join hands and sing Kumbaya for consumer responsibility. But really, that won’t persuade those (“foolish” or “wise”, who is to say?) Americans, such as that woman who will spend that $40k on gas instead of moving within walking distance of everywhere she would want to get to. Even-odds money says that women understands (to the bottom of her feet and soul) that her driving habits are affecting the planet, but she is needs to do the driving for her kids, family, blah, blah, blah.

Phenics, I agree with you on many points. And people should be able to make decisions for themselves, based on their own situation, values and priorities. I realize that it's unfair for me to cast judgment; I was just struck by how much her statement seemed like an oversimplification of the matter. To me it's an interesting insight into the housing market and the affect high prices are having on families.

Looking at it from the flip side, I bet that a lot of the people who move far away for financial reason(rather than a desire for small town life) would love to live closer to work. It shouldn't just be on the individual's shoulder--the bigger parties can help make it more feasible.

It's also worth considering that many Americans are deep in debt. If they don't live within their means when gas is cheap, what's going to stop them from opting to go further into debt when gas prices rise?

The funniest part is that once gas starts running low, these exurbanites are the ones who will be fucked the most. Cargo transport will definitely be tough, but these people won't be able to leave their otherwise useless exurbs.

Yeah, that $50K saved on the house will be REALLY worth it then. I chalk that lack of forward thinking up to Darwinism.

A few people imply that the price of gas has no effect on people's decisionmaking. That is simply not true. Look at what happened to the sales of SUVs when gas prices more-or-less doubled in the last couple of years. Sales of SUVs and other large vehicles have plummeted. Toyota is selling more hybrids than they ever dreamed of. That is one of the reasons that American car companies are in such financial trouble right now. They banked all their business on selling profitable SUVs and ignored the market for smaller, more efficient cars. When the bottom fell out of the SUV market, their profits disappeared.

I would venture to guess that people who chose to live way out in the burbs do so for a variety of reasons, the price of gas being a very small part of that. If a mortgage company says you can only afford $200K for a house, then your choice is to rent or live way out in the burbs (current median price for a house in Seattle is roughly $400K). When the mortgage company figures your stats for a loan, the price of gas or distance of commute is not taken into account.

Houses and cars are not changed lightly, quickly, or easily. Even if you move from one house to another house closer to work of the same value, you loose roughly 15% on the transaction cost, plus the hassle of moving and the disruption of everyone's lives in the household, change of schools for kids, loss of neighborhood friends, etc. Cars are a bit easier, but even that isn't something changed on a whim. The next time I buy a car, for example, I will very likely downsize to something that gets better mileage than my current mid-sized car. But it isn't very old, and I had planned to wait at least another year or two. Gas was about $1.25 p/gallon when I bought it.

The price of gas has risen very rapidly, and looks like it will probably continue to do so for the immediate future. It will take some time, but people will make changes in their lifestyle based in part on fuel prices. But some of those choices may lag well behind the current spike in gas prices.

So obsession with owning a house is a big part of the problem. Maybe people need to adjust their life plan, because they don't realize they're screwing themselves and their children down the road by planting roots in the suburbs and exurbs.

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