The Not-So-Strange Impacts of High Gas Prices

News reports have recently started to provide interesting real world examples of what economists have always known: higher gas prices affect the behavior of drivers. Not only are high gas prices causing a dramatic and rapid increase in the use of transit services, but they are also leading drivers to change their vehicle purchasing choices. Although the extent and permanence of these changes are not yet known, these two different effects are interesting indicators of separate consumer decisions. The decision to use transit is a choice that can be made on a day by day basis, if you live in an area with transit availability. If gas prices are high, you can let your car sit and take transit for a few days or weeks, and switch back to a vehicle once prices drop. However, the purchase of a more fuel efficient car indicates a belief that higher gas prices are here to stay for a least a few years – it is a significant investment that goes beyond the choice of whether to take the bus today or not. These changing decisions do not end with car purchases.

If a daily decision can be made about whether to take transit, and buying a vehicle is made with perhaps a 3-6 year future in mind, then the most serious choice consumers make affected by gas prices may be buying a house. This is a decision that is typically in consideration of an even longer time period. Housing decisions are affected by a number of other things besides gas prices, like schools, acreage, and proximity to work, but as gas prices rise and transportation eats up a more significant portion of household budgets, it’s not unreasonable to expect that housing patterns will start to change (assuming that tradeoffs for these other things remain constant). Given the current tumult in the housing market it is hard to see what trends may emerge, but it wouldn’t be surprising to see an increased rate of densification in the following years. Gas prices may be joined by another transportation cost in the near future: variable road pricing. The onset of this additional driving cost could have an even more dramatic effect on land use, vehicle, and daily transportation decisions.

The price incentive to increase the density of land use is not likely to go away, and it may in fact intensify. The ripple effect of high gas costs has not played out in its entirety, but we are certainly seeing some fascinating indicators of how higher transportation costs will alter people’s movement choices and land use patterns.

-Daniel Lewis

Two Strategies for Fighting Traffic Congestion

Several days ago Chicago was awarded $153 million by the US Department of Transportation to implement the first ten miles of a bus rapid transit system in coordination with a variable price parking scheme downtown. Compare this strategy to that of Los Angeles, which is moving forward to get $213 million in federal funding for converting HOV lanes to HOT (High Occupancy Toll) lanes as part of its regional congestion reduction demonstration initiative. Why are these two cities going after congestion in such strikingly different ways?

The Chicago plan envisions an eventual 100 mile system of dedicated bus rapid transit with a parking pricing strategy that charges more during peak times. Taken together, these steps will encourage commuters to drive downtown at off-peak hours or to use transit. By using innovative technologies, like traffic lights that automatically change for buses, this system promises to be cutting edge.

Chicago is making this bet: that the indirect cost of congestion in the downtown area is currently so high that putting a direct price on driving will provide benefits that outweigh the costs to the economy. In other words, downtown Chicago has such allure for businesses that they are willing to bear higher costs (i.e. their employees may need to pay more or travel more inconveniently to get to work) to locate there. Improving transit is a key element of this strategy, and a viable one, because of the city’s density.

Los Angeles is going about it differently: the city is implicitly recognizing that the LA region is so diffuse that the allure of the downtown is not strong enough to bear higher commuter costs – instead they are raising the price of driving on the freeways in general for those who want to pay for quicker passage, and investing more in buses and park and ride lots. Taken in isolation, this plan creates few new incentives for the use and viability of alternative modes like transit or walking. But if the metro area proceeds along these lines to a region-wide road pricing scheme it could, in fact, encourage densification of the area’s economic activity - making transit a more viable and attractive option in the long term.

This is not to say that increased transit use should be the end goal of every region. Nevertheless, increasing useful alternatives for commuters is an economic benefit (be they buses, walking, bikes or rail), and those alternatives become most feasible in dense urban areas – which, through no coincidence, are the engines of growth for the nation’s economy. Moreover, while shifting commuters to transit is often a challenge in cities like Los Angeles, it will be an even greater challenge to meet energy security and climate change goals by increasing the overall capacity of the freeway system there. If capacity expansion is necessary for economic growth, that capacity needs to be provided with a sustainable energy source and climate change in mind.

-Joshua and Daniel

Metro to Dulles

Federal aid for the construction of a metro line to Dulles Airport has finally been approved, years after planning began. Sadly, once completed the metro ride from downtown won’t save much time compared to the existing options, which are generally considered poor. One look at the proposed line and the problem becomes clear: from Metro Center there would be 18 stops to the airport and the ride would take an hour or longer. Is this really the best connection to the airport that DC can devise?

Without a doubt, the proposed line, which will connect Tyson’s Corner to the region’s transit network, will promote substantial economic development along the corridor. However, in terms of moving people to the airport it will be less than optimal. Travelers benefit most from an express service – which the proposed line is certainly not. The plan could be revised to remove some of the planned stops, but that doesn’t appear likely or economically practical, since the extra stops may provide more societal value than an express service would.

The struggle here is the split purpose of the line: on one hand it is intended to support economic development along the corridor, on the other hand it is supposed to move travelers to the airport. The two goals are less than perfect companions.

A third option which got only cursory attention was increased utilization of the existing Dulles Expressway. An express bus service with dedicated rights of way out of downtown and onto the Expressway is one of the ideas that may make more sense purely in terms of the best route to the airport. Such a bus with dedicated rights of way would still require significant infrastructure investment, but considerably less than a metro extension all the way to the airport.

Suffice it to say that if multiple options had been equally and objectively considered in the decision of how to get people to Dulles a metro extension may have not topped the list. That being said, it is high time and economically essential that DC finally connects to Dulles via effective transit. Metro service to the airport may not be a perfect solution, but it will certainly be an improvement over the current choices.

-Daniel Lewis