Are You Caught In The Energy Trap?

It is the first day of November but the national average gasoline price is $3.437 per gallon according to AAA's National Fuel Gauge. This is the first year I can remember in which gas prices have not fallen below $3/gallon this late in the fall. Last year's price on this date was $2.80/gallon. This event does not bode well for America's economy and most of those trying to eke out a living within it.

The New America Foundation's Lisa Margonelli, director of the Energy Policy Initiative at the New America Foundation and author of Oil on the Brain: Petroleum's Long Strange Trip to Your Tank, describes the energy trap.

In November of 2010, American drivers spent nearly $32 billion on gasoline. Every 25 cent jump in the price of gas siphons $90 million a day away from the recovering American economy. Because we have few choices but to commute to work in private cars, we are trapped by high gas prices.

You can do the math. The price of gasoline is now about 63 cents higher than it was last year in November. How many more billion dollars being spent on gasoline does that make, assuming demand is about the same? You can find the actual demand numbers at the Gasoline section of the EIA's This Week In Petroleum. Demand is slightly down due to the higher prices, but not much.

The "Energy Trap" is really about the price elasticity of gasoline demand, specifically, the lack thereof. If you gotta drive to get to work, to get food, and so on, you gotta drive, no matter what the price is. Even worse, America gives you few alternatives (trains, buses, whatever) to driving, and public transit systems have been cutting service and raising fares all over the country.

The energy trap is particularly hard on American households. The average family of four making $50,000 a year spends nearly $8000 a year on their cars, maintenance, and fuel combined--more than they pay for taxes or medical care. (Those numbers are from the Department of Commerce. Many families actually spend more on getting around.)

When the price of gasoline rises, many of these families find that they're trapped: They have to spend even more money on gasoline and cut other necessities, because they can't cut back on gas. For one thing, many families at this income bracket can't choose to move or change jobs to reduce the miles they commute. Some families even have three or more part time jobs, which require a lot of driving for less income. At the same time, they can't buy a more fuel efficient car because it's difficult to get credit and often the gas guzzlers are the cheaper used cars.

And then there is this—

And while many American families have experienced the Energy Trap firsthand over the past few years, it hasn't been officially studied, or documented by journalists...

No, these "journalists" of ours were too busy describing Charlie Sheen's insane ranting ... wait! ... it isn't Charlie Sheen anymore, that's old news. Who's all the rage on Planet Stupid now? Is it Kim Kardashian? It's so hard to keep up!

Here's Lisa's simple description of the Energy Trap. The video starts out innocently enough—if you're an American, you probably have a car...

 

Comments

[Scott]

I sold my Tundra quad cab 4 x 4 to try and escape the energy trap. Now I drive the 19-year old, 4 cyclinder, manual transmission pickup. My fuel bills fell from $90 every 10 days to $45 once a month. We may sell the house to move closer to my work soon, too. If I can save enough money up, I'm thinking about buying a used hybrid...