Gas Price Floor - Food for Thought

[jackellis]

I like the idea of a floor on gas prices because it will encourage the automakers to produce more efficient vehicles and it will provide the rest of us with a pretty powerful incentive to buy them. It will also help with the development of alternatives to gasoline that are still a long way from being commercially viable.

This paper is worth a read.

Of course, I don't mind paying less than $2/gallon either, however temporary the reprieve may be.

[LCHIEN]

I like the idea of a floor on gas prices because it will encourage the automakers to produce more efficient vehicles and it will provide the rest of us with a pretty powerful incentive to buy them. It will also help with the development of alternatives to gasoline that are still a long way from being commercially viable.

This paper is worth a read.

Of course, I don't mind paying less than $2/gallon either, however temporary the reprieve may be.

Fundamentally I'm not a big fan of legislation through taxes. Or in this case controlling the minimum price.
However in this case the free market has not worked. Also there is a special situation... in a free market production goes up to meet demand, but in this case we are faced with a perpetually decreasing amount of oil that is harder to find. It took millions of years to make the oil but just a couple of centuries to deplete. I can only imagine some members of joe public out there buying big Pickups and SUVs because they're cheap now and gas is cheap.

I think the other factor is that it will take years to get big autos off the road - at their cost, they need to have a useful life averaging over ten years. So to have efficient vehicles on the road in the next few years and not in 2020 I can appreciate the pressure to add taxes or have this minimum price.

I can only hope that they use the taxes or surcharge wisely to support alternate fuels, efficiency research.

I would imagine that a lot of legislators would be unpopular for voting for this or taxes.

[JR]

We have a weird market situation here. It takes ~5 years to get a new vehicle to market (ok maybe less if you're extremely efficient) and the vehicle last 20 years. The price of fuel doubled then halved (approximations) within 2008.

How can car builders and buyer habits ever be expected to match up? The wild oscillations need some form of constraint.

JR

[vaking]

Why are we all so obsessed with price of gasoline and efficiency of vehicles? We waste resources in lots of places. Let's touch subject closer to woodworking. The best furniture is made of real wood. Whatever is left of that wood is turned into second-rate materials like particle board. Manufacturing particle board requires chipping wooden leftovers into very small chunks and then gluing them back together. Most glues are made of or require oil - the same oil that gives us energy. Chipping wood also requires energy. So we spend fair amount of oil. And all that so we don't waste wood leftovers because they are still more expensive than oil. Wood is renewable resource, oil isn't. The final product is material that isn't really worth the effort in my opinion. You want to preserve natural resources - stop using particleboard. We will be better off if we simply burn those wooden leftovers and get few joules of energy out of them.

[crokett]

Alex, if you don't make the particle board you can't sell it. So my guess is selling the particle board (even if it requires more oil, etc for the glue) returns more money to the manufacturer than simply burning the chips and not buying the glue.

[cgallery]

I agree w/ Loring.

I'd also like to see more improvement in traffic optimization. Around here (Milwaukee), the lights are incredibly screwed up. So much new controller, wireless, and multiplexing technology is available now I find it difficult to believe we can't get the lights working better.

Just remember, every time you see a bunch of cars sitting at stop lights, they are getting 0-MPG.

I think the first politician that takes this and runs with it (in terms of federal mandates to improve traffic flow) will be elected the next POTUS.

[crokett]

Actually, in a lot of cities the lights are that way on purpose. The city would rather you walk or use mass transit. If they retimed the lights to make it easier to drive, everyone would drive. Screwed up lights and congestion keeps cars off the street. Likewise, the traffic patterns in a lot of the new shopping centers are screwed up for driving, on purpose. The developers want you to park and walk. Personally, I avoid those like the plague.

[pierhogunn]

To Lorings point about a diminishing supply of hydrocarbons, that may not necessarily be true.

There have been some recent discoveries revolving around fungus that chews up darned near everything with long-chain hydrocarbons being one of the outputs, along with methane and water...

The article, in Scientific American I believe said that if this research bears out, not only will we have a new, cheap, and safe way to make myco-oil, but the research could also completely turn the theories of petroleum formation on its ear...

we may be spinning in place while trying to find an alternative to a fuel that is very energy dense, and that we simply don't know how to extract all the energy out of, yet.

[jlm]

It takes ~5 years to get a new vehicle to market ... and the vehicle last 20 years.

20 years? When was the last time you bought a new car? Seriously, though, I doubt even many of the "luxury" (and therefore presumably better-built) models on sale now will be in usable condition 20 years from now. Cars nowadays are designed to last a little beyond the warranty period. The manufacturers have built a business model that requires the vast majority of drivers to replace their car on a 3-5 year cycle, so they design cars to "encourage" this behavior (by falling apart after 100K miles).

Your point is valid, though - even the cheapest econobox can be expected to last at least 10 years (likely not with all its original parts, though), and given the long design-to-manufacture cycles, it's tough to guess what the marketplace will be asking for down the road. Just ask all the folks trying to sell used SUVs how that's going...

To the original topic: A floor on gas prices would probably help efforts to increase efficiency, but it's a political non-starter. Anyone who votes for it will be vilified by his opponents and probably not win his next election. If by some miracle it passed, it would probably be repealed by the next Congress, composed of many new members who campaigned on a promise to lower gas prices (especially if oil was back to $100+ per barrel around election time).

[crokett]

Aside from it being unpopular with voters such a floor would be extremely unpopular with the petroleum industry, and more than likely the auto industry as well.

[cgallery]

Actually, in a lot of cities the lights are that way on purpose. The city would rather you walk or use mass transit.

Oh yeah, I realize that in some cases it is done intentionally. I would fix those first, as they should be the easiest.