Car Talk

I don’t usually drive that much, but after filling up my Mini Cooper for a grand total of $46 over the long weekend, I started thinking about all of the people who really have to drive. These folks do not have public transportation readily available and must get in their cars daily to earn a living. A lot of them are not in a position to buy a new and/or more fuel efficient vehicle at this point, so here are some tips that I learned when Matt Stone, the executive editor of Motor Trend appeared with me on the same Fox Business News show yesterday.

There are the obvious pointers, like try to carpool with people as much as possible. When gasoline prices plummeted, the idea of sharing your commute with a neighbor or heaven-forbid, a total stranger, seemed onerous. But with the national average for a gallon of gas well over $4, necessity certainly makes for strange bedfellows, or car mates. I understand from friends who are long-time carpoolers that there are some unwritten rules that you may want to know. For example, there is no talking about politics, religion or gossip. In fact, in some cars, there is no talking at all. Additionally, the driver usually chooses the radio station, but most are tuning into news for traffic updates. One woman told me that I should underscore that “back-seat driving is absolutely, positively prohibited under any circumstances!”
Beyond carpooling, Matt Stone’s energy-saving list starts with an interesting tip: driving habits affects mileage more than anything else. He noted that those who tend to drive aggressively are by definition wasting gas because revving the throttle is wasteful. This is another reason to curse those who weave in and out of traffic or be upset with drivers who seems to accelerate and decelerate every 5 seconds. The converse is that those drivers who make smooth transitions on the road tend to be more energy efficient.

Maintaining your car also helps with mileage—that means keeping your tires properly inflated and that wheel balance and alignment are checked; making sure that your filters are fresh and fluids are clean; and that the engine is tuned up and firing on all cylinders. This may seem like a pain, but it requires a quick stop at your local station and may help you save a few bucks over the longer term.

Here is a tip that I will never follow: try to run your car without air conditioning. I will admit that my carbon footprint will never shrink significantly because I am in love with A/C, both in my home and in my car. But for those of you who say, “I don’t like air conditioning” or “we don’t need air conditioning because we’re so close to the ocean!” (You know who you are, you crazy New Englanders) this tip is an excellent rationale for why you are sitting on Route 95, sweltering in ridiculous humidity.

Finally, the last tip gives new meaning to the term “junk in the trunk.” Matt said that one way to improve efficiency is to empty out your vehicle’s trunk. The extra 50 or 100 pounds of junk requires more gas to lug around and frankly, isn’t it time to store the chains and shovels? There will be plenty of time to load it all up again.

Driving Lessons

I took my 16-year old niece out to practice her driving over the weekend. She noted that it was much easier to drive my Mini Cooper then her mother’s big SUV. I said, “Don’t get too used to Mommy’s car---it’s about to go the way of the dinosaur and become extinct!” To demonstrate the difference between the two, we headed to the gas station for an experiment. When we were through filling up the Mini and the SUV, Emily was clear: “Why would anyone buy the big car?”

Ah, youth…if only it were so easy. I explained that most of the people who purchased the big guzzlers did so when gas prices were lower—she could not believe how quickly the price at the pump went from $1 per gallon to this week’s average of $4 per gallon and she is not alone. As prices reached a national average of $4 a gallon for the first time over the weekend, many families are forced to make some difficult choices. But the spike is not felt uniformly across the nation.

Gasoline prices have increased by 26% over the past year, but the spike is not equal in its pain quotient. According to the Oil Price Information Service, certain parts of the country are harder hit than others. The percentage of income that is being spent on gasoline is highest in rural areas of the south, New Mexico, Montana, Wyoming and North and South Dakota. It is pretty simple to understand why the disparity exists: those areas where drivers earn more money and drive shorter distances or have access to more robust public transportation – basically most of the northeast -- are not feeling the pain as much as those in the other areas of the country.

Tell that to the woman whose conversation I overheard last week. She commutes 45 minutes to her workplace in Massachusetts and there is no reliable public transportation that she can take. She drives an old Ford Explorer, which costs over $80 to fill up. “I can’t afford to buy a new car, so I am stuck with this darned thing!” To offset her increased costs at the pump, she no longer takes the family out for dinner on Friday nights.

And that is just one story of pain at the pumps. There are so many others, which you have probably read about. Until we develop a true energy policy in this country, you are likely to hear many more tough stories that highlight difficult choices that people are forced to make. And of course my niece is absolutely right about anyone looking to buy a car today: why in the world would you buy a big car/truck knowing what we know now?

The New National Pastime

At last year’s Memorial Day BBQ, the talk surrounded the slumping Yankees and a housing market that was beginning to show significant signs of distress. But this year was different…no talk of baseball, houses and barely a whisper about the endless primary season. Almost everyone at the BBQ spoke extensively about gasoline prices---where they were the highest, lowest and the outlook for the future.

I listened for clues as to whether people were changing their habits as a result of $4+ per gallon prices at the pump and was pleasantly surprised. A number of the attendees noted that they were taking public transportation more often and many of the soccer moms and dads are now trying to coordinate carpools for kids’ activities. Even my sister, a slave to her massive SUV, is considering scrapping the big car for a more efficient one. The data confirms the BBQ chatter—according to the Federal Highway Administration, the amount Americans drove fell 4.3% in March compared with a year earlier, the first time driving has fallen since 1979. But there is more to the price spikes than US consumer behavior.

While the US consumes a massive amount of energy, our use alone can not account for the price of oil more than doubling in 18 months, or for that matter, the six-fold rise in the past seven years. We already know that the biggest driver of new demand has been emerging economies, whose entry in the global economy has created a new consumer. What you may not realize is that the rules of economics do not apply in many of these places. A quarter of the world’s gasoline consumption is subsidized and in terms of population, half of the world uses energy subsidies.

That means that even as we change our behavior here in the US, energy consumers in China, the Middle East and Russia, have no incentive to make similar types of shifts because much of the cost increases have not been passed on to consumers. These subsidies have artificially raised inflation in the developed world through artificially high oil prices and suppressed inflation in the developing world, where inflation would have been even higher in the absence of subsidies. The net result is that the customary forces of supply and demand have yet to play out on the world stage. The good news is that the situation is unlikely to remain indefinitely. As fiscal pressures mount, some countries will be forced to incrementally remove these subsidies. The net result should be lower energy prices for the globe. Until then, however, expect to hear more about gas prices on the BBQ circuit.