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The Solution to the Gasoline Crisis and Other Problems

by Francisco Frias Tuesday, Apr. 26, 2005 at 6:26 PM
mymailboxwontbeflooded@yahoo.com

An article which discusses the current gasoline crisis and proposes a solution within the context of what is politically possible in California. Incorporates quotes and statistics provided by the California Energy Commission and the BP Statistical Review of World Energy.

Currently, the federal government taxes gasoline at

18.4 cents per gallon and the state of California at

18 cents per gallon. This is considerably less than

what other industrialized societies tax gasoline. I

propose that increasing the gasoline tax and using the

funds to directly fund mass transit will improve

traffic congestion, reduce pollution, and improve the

economy, while moderating gas prices. This will be a

broad discussion concerning the current status of

these issues in California.

The city of San Francisco provides us with an example

of how such a tax can be beneficial. San Francisco’s

mass transit system is currently experiencing a budget

shortfall and is proposing raising fares to .75.

This in itself is not the problem, although the fare

increase will hurt riders and dissuade the use of mass

transit. The problem is that San Francisco has a

mediocre mass transit system. After fares are raised,

service is cut, parking fines are increased, garage

parking fees are increased, etc. to close the budget

shortfall, San Francisco will still have a mediocre

mass transit system. Traffic congestion is a function

of this. Luckily for San Franciscans, much of the

pollution caused by drivers in the SF Bay Area gets

blown southeast to Modesto.

In discussing the current crisis in the San Francisco

Chronicle recently, Andrew Sullivan, Chairman of

Rescue Muni made comments which appear to suggest that we increase gasoline taxes, without actually making such a suggestion. For example, "However, this rate of increase in fares, fees, and fines is not sustainable over the long haul…There is a real need to find alternative sources of revenue for Muni." Indeed. He also commented, "It is critical that any new source provide incentives for people to use transit instead of driving."

An increase in the gas tax that directly funds mass

transit fits such a definition. This is also why I

favor an increase in the gasoline tax to fund mass

transit over an increase in the sales tax. An increase

in the sales tax does not incentivize the use of mass

transit over driving. If I purchase a pair of shoes

for the purpose of walking, an activity that does not

contribute to either traffic or pollution, how is it

justifiable to tax this item to fund mass transit, and

not tax the consumption of gasoline to fund mass

transit, which does contribute to traffic and

pollution?

A gasoline tax makes far more logical sense as a

source of revenue for mass transit than parking fines,

which is a logically bewildering solution. As a

society we have a need for mass transit. In order to

provide for this need we must depend on people

breaking the law? Curiously, according to its website,

Rescue Muni does not have a position on a local tax

increase of 1 cent per gallon on gasoline, even though

it was part of the MTA’s presentation to the MTA

board.

The city of Los Angeles provides us with another

example of how such a tax can be beneficial. Los

Angeles has the worst traffic congestion in the

country, as well as the worst air quality. These are a

function of a poor mass transit system. Having lived

in both cities, and having had the experience of using

mass transit in cities like Paris and Madrid, I would

have to rate SF mass transit a C and LA mass transit a

D, compared to the A I would assign Paris. These

European cities aren’t even among the cities reputed

to have the best mass transit in the world, such as

Tokyo, Moscow, and Mexico City.

The current mayor of Los Angeles, James Hahn, proposed a plan last year to allow hybrid vehicles to park at the city’s meters for free. He was quoted in the Los Angeles Times as saying, "I think we want to do

whatever we can to improve air quality in Los

Angeles." I was astounded. The utter impotence. The

complete lack of imagination. Instead of proposing a

bold vision that would truly make a significant

improvement in L.A.’s air quality, such as a world

class mass transit system, he proposes a trickle down

solution: When enough rich people buy a hybrid, and

we’ll provide them with financial breaks and

incentives in the meantime, perhaps the air quality in

Los Angeles will slightly improve. "People will

realize they won’t have to fish around for those

quarters." Besides being unaffordable for the majority

of Californians, hybrids do not do anything to relieve

traffic congestion.

During James Hahn’s term, Los Angeles, a city of 3.8

million people went six weeks without mass transit. I

seriously doubt that James Hahn uses mass transit. He commutes from San Pedro in a conventional gasoline powered vehicle, but was considering buying a hybrid, according to the article. How can you have such a lofty goal and come up such inane ideas?

On the other hand, perhaps he is doing more to advance mass transit than the Governor, most state

legislators, and people who work on behalf of the

government. I have heard him proudly proclaim that Los Angeles is starting up two new rapid bus lines per

month. We still have poor mass transit. I know. I use

mass transit.

In 2000 the State Legislature passed Assembly Bill

2076 which required the California State Energy

Commission and the California Air Resources Board to examine ways that California could reduce its

dependence on petroleum. The joint agency report was finished in 2003 and is viewable on the CEC website. It is titled, "Reducing California’s Petroleum

Dependence." A very broad title. It made such

authoritative statements as, "By 2020, it is possible

that 45.5 million Californians will have 31.5 million

registered vehicles consuming 24.2 billion gasoline

equivalent gallons of gasoline and diesel fuel. If

this consumption occurs, it would require Californians

to accept major expansions in petroleum refinery and

delivery infrastructure, further dependence on foreign

energy supplies, decreased environmental quality, and

reductions in public health."

The 19 page report does not contain the words mass

transit. It is absolutely not discussed as a topic or

strategy, despite not being excluded from discussion

by the bill. I e-mailed the principle authors to ask

them why they gave such a broad title to their report,

why they did not discuss mass transit as a means to

reducing petroleum consumption, and what their view of mass transit is as a means to reducing petroleum

consumption. I received some astounding comments.

Susan Brown wrote back, "Based on available research, and our analysis of the potential for public transit in the technical appendices to the AB 2076 Report, we concluded that even doubling use of public transit in California, would have a minor(as I recall about 2 percent effect) on reducing petroleum demand."

Less astounding, but illustrative of the problem are

Gerry Bemis’ comments. "The Energy Commission sees mass transit as providing only a modest reduction in petroleum demand, maybe 5% or so. Not every city has an efficient transit system…Much of Sacramento is not well served by our transit system due to the length of trips and/or need for multiple transfers."

Would not the logical manner in which to proceed be to

build and develop mass transit that serves all of

Sacramento? How is it that countries such as Spain,

France, Germany, and England that have populations

larger than California consume less oil than

California?

Dan Fong wrote something even more revealing:

"Although we recognize that public transit plays an

important role in providing transportation service to

many Californians, we found that doubling usage rates

would not produce a significant reduction in petroleum

fuel demand. We also did not have a good methodology to determine how increasing usage rates could be achieved and what investment would be needed as a function of increased usage... If our resource levels improve in the future, a more detailed study might be supported and we might then be able to more accurately describe the potential for transit and make recommendations on making future improvements."

Apparently, the state of California is not even

considering the use of mass transit as a means to

reducing gasoline consumption, and subsequently

traffic and pollution. The enlightened Governor

declared at his most recent State of the State

address, "This is a car centered state. We need

roads."

Californians consume 16 billion gallons of gasoline

annually, according to the California State Energy

Commission. This is a tremendous potential source for revenue. The major objection to an increase in

gasoline taxes is that drivers may not want to pay a

few additional cents per gallon of gasoline.

Inevitably, they will end up paying far more than a

few extra cents per gallon. It is an amusing(and

worrisome) exercise to project what the future price

of gasoline will be based on the rate of increase over

the past five years.

For instance, if we take a particular date such as

June 7th, 2004, we can see that the average price of

regular gasoline in California was .316 per gallon,

according to the figures posted on the California

State Energy Commission’s website. This represents a 33.72% increase from the same time of the previous

year. From 1999 to 2004 the average increase from year to year on or near this date was 12.99%. If we project what the price of gasoline will be on or near June 7th, 2005, it will be .617 per gallon if based on

the average yearly increase. If based on the increase

from 2003 to 2004 of 33.72%, it will be .10 per

gallon.

If we pick another date such as October 25th, 2005 and

do similar projections, we obtain a price of .722

per gallon if based on an average yearly increase of

.69% from the same time of the previous five years.

If we base the projection on the increase from 2003 to

2004 of 37.82% for this time of the year, the price

will be .299 per gallon of gasoline.

We can also make predictions based on other factors.

For instance, Goldman Sachs, the largest trader of

energy derivatives in the world, recently predicted

that the price of crude oil will rise above 0 per

barrel. The price of crude is the largest factor in

determining the price of gasoline. If .21 out of a

total price of .38 for a gallon is attributable to

the price of crude as was the case on March 28th, 2005 according to the CEC website, we can logically

conclude that if the price of crude on which this

gallon is based on were to double, the cost of the

gallon attributable to the price of crude would also

double. In this example, the price of a gallon of

gasoline would rise to .59. The CEC also has a

formula for predicting the effect that crude prices

have on gasoline: 25 cents for every . So if the

price of crude were to ascend , the price of a

gallon of gasoline would increase by .25 according

to this formula.

Rising global demand is the primary reason cited for

rising gas prices. In order to consider the impact

that this rising global demand will have in the near

future, consider the following figures from the BP

Statistical Review of World Energy. In 2003, the U.S.

with roughly 4% of the world’s population, consumed

25.1% of the world’s oil. In contrast, China and

India, each with populations exceeding 1 billion

people, consumed 7.6% and 3.1% of the world’s oil

respectively. These are rapidly industrializing

societies that will continue to compete for the

world’s available supplies. The effect they will have

will be to inevitably push the price up. What theses

figures reveal as well is that the U.S. is the country

that has the greatest impact on the supply and demand relationship that affects the cost of oil.

The chaos in Iraq, home to 10% of the world’s proved

oil reserves, and the threat of terrorism will not

vanish overnight either, and these factors will

continue to push the price upwards as well. Saudi

Arabia, home to 22.9% of the world’s proved oil

reserves, has demonstrated its vulnerability to

terrorism numerous times. The war being fought in

Iraq, purportedly to establish democracies in the

Middle East, but suspected by others, including Chief

U.N. weapons inspector Hans Blix, to secure a low

price of oil for the U.S. economy, should provoke some

questions: If true democracies were established in the

Middle East, would its citizens administer their oil

wealth in a manner that favors the lifestyle and

economy of the citizens of the United States? That is,

would they sell us all the oil we demand for a low

price? I raise this because Americans seem to have a

sense of entitlement over what they pump into their

vehicles.

Ultimately, we must grasp the concept that the world

does not contain an infinite supply of oil. According

to the BP Statistical Review, the world contained 41

years of proved oil reserves at the end of 2003, known

as the reserves-to-production ratio, which is derived

from dividing the total amount of proved oil reserves

by the amount of production for that year. This figure

has only diminished 6% from the peak of 43.7 years in

1989 as probable reserves are converted to proved

reserves. As production of oil increases in order to

satiate worldwide demand, it is inevitable that this

figure will diminish, and the effect it will have on

prices will be to push them upwards. The only logical

response is conservation. An economy based on the

gratuitous consumption of gasoline is not sustainable.

The top recommendation in the aforementioned joint

agency report is that California reduce its petroleum

consumption by 15% below the 2003 level by 2020 and

maintain that reduction for the foreseeable future,

relying primarily on vehicle efficiency improvements

and the introduction of alternatives to petroleum.

Considering the economic impact that .50 and .00

per gallon gasoline will have on our economy, such a

recommendation seems to have little practical

application to reality. It would appear that we need

to conserve much more than this, much sooner, and have viable alternatives to driving. Otherwise, the average Californian will be left severely economically

burdened by the cost of gasoline, and if we don’t have

adequate mass transit, our economy will face severe

challenges. The main problem with the CEC’s approach is that they have made their goal of reducing

petroleum demand subservient to their commitment to

not recommend tax increases. Assuming the rest of the U.S. was to reduce its consumption by a similar amount and world production levels were to remain the same, the U.S. would still consume 21.84% of the world’s oil. Considering the industrialization of the world and the patterns of oil consumption, we must seriously question whether this is sustainable.

If the price of gasoline is constantly fluctuating,

but inevitably increasing, it does not make much sense

to object to an increase of 10, 20 or 30 cents in the

gas tax if such a tax has the potential to moderate

the price of gasoline by providing the population with

alternatives to driving that will reduce demand, as

well as provide other significant benefits. Simply

encouraging Californians to inflate their tires will

guarantee that the price of gasoline will ascend to

.50 and .00. It is ironic that people who may

oppose paying a few extra cents per gallon may end up

wasting comparable or greater amounts idling on our

crowded streets and freeways. A situation which mass

transit can ameliorate.

Demand for gasoline exceeds California’s refining

capacity, but only by a small amount. According to the

CEC, California refines 90% of its gasoline, and it

imports the rest of it, at a higher cost. Based on

this information the Southern California Auto Club was

urging drivers to conserve gasoline a year ago.

According to spokeswoman Carol Thorp, "Demand for

gasoline outstrips supply in California, which helps

push prices upward. Reducing consumption could

eventually result in lower prices." The SCAC’s top

recommendation was to carpool or to use mass transit.

This is a good short term goal for California, to

reduce our demand for gasoline to within our refining

capabilities. Considering the numbers, it is

achievable, and it is the only thing we can do to

moderate the price of gasoline. Beyond this, we should

consider reducing our demand for petroleum within what domestic supplies can provide. According to figures from the CEC, 36% of the oil we consume in California is from foreign sources. Judged strictly on the percentage, it seems achievable. Of course, in the

context of our political, social, and economic

structure it may be considered laughable and

unachievable. We must consider that if our economy

depends on cheap gasoline, and we are no longer able to get cheap gasoline, we must either change or

collapse.

We are underutilizing mass transit in California,

largely because it doesn’t exist. There isn’t a single

city in California that has an efficient transit

system. Those of us who live in urban centers along

transit corridors can debate whether it’s worthwhile

to wait half an hour for a bus to go somewhere.

Perhaps during certain times, bus service is frequent,

but at other times it is dismal and unreliable. For

Californians who live in the majority of cities and

towns, however, this isn’t even an option. For them a

more realistic option is, do I want to take 3 hours to

run an errand?

I e-mailed Carol Thorp of the SCAC twice and discussed the concept of increasing the gas tax to fund mass transit and presented her with the comments made by CEC members regarding the potential effect that mass transit can have on reducing gasoline demand. It would have been odd if a spokesperson from the Southern California Auto Club were to defend mass transit. The SCAC advocates the use of mass transit in order to reduce demand for gasoline and moderate prices, but most Californians have access to either mediocre or poor mass transit. So I asked her, how can enough people be persuaded to use mass transit in order to conserve enough gasoline to make a difference? Would

it not be in the interest of drivers to support a tax

that could provide this alternative to people, in the

name of moderating gas prices, reducing traffic, and

reducing pollution?

She did not respond. She is probably one of those

people that is married to the notion that a tax is

bad. Perhaps she did not want to publicly acknowledge

her untenable position. The SCAC would like to see gas prices moderated, and supports the use of mass transit to do so, but most likely does not support a gas tax to do so, and has no suggestions for how to fund mass transit. The result for the SCAC and people who have similar positions is that there is nothing they can do to achieve their goal of moderating gas prices.

Neglecting investment in mass transit and solely

relying on anticipated or hoped for improvements in

fuel efficiency will keep us locked in to the cycle of

petroleum dependence and spiraling gasoline prices.

And as anyone who lives in Los Angeles knows, relying on the car as the primary mode of transportation will inevitably result in major traffic congestion.

Communities that solely rely on the car as an

efficient means of transportation will inevitably

replicate Los Angeles’ unsustainable model and all of

its problems: traffic congestion, pollution, a

depressed economy.

According to the website of current council member and mayoral candidate Antonio Villaraigosa, traffic

congestion costs the Los Angeles economy billion

dollars per year. I realize that such statistics are

estimates which could either be higher or lower.

Still, such statistics blare a certain logic at one.

If we, Los Angelenos, were to invest an additional

billion dollars per year in a world class mass transit

system in order to relieve traffic, wouldn’t we come

out several billion dollars ahead? At a certain point

we must ask ourselves whether it is viable to continue

to invest in the car as the primary mode of

transportation. We must ask ourselves whether it is

viable to take productive farmland and build Walmarts,

Home Depots, and gasoline stations with huge parking lots, as is done in the Central Valley, in effect

subsidizing these corporations. We have a scarcity of

housing in California, yet we have huge parking lots

everywhere.

The benefits of efficient, fast, reliable mass transit

are potentially enormous. It is the most efficient

manner that we as citizens have to move about in space and time. If I catch the red line at Wilshire and

Vermont in Los Angeles, it only takes 10 minutes to

get to Hollywood and Vine, once I’m on the train.

That’s faster than a car can get there, most of the

time. For people who are driving an average of 20

miles per hour on our freeways, thus taking 2 hours to

drive 40 miles, imagine that a certain percentage of

cars was to be removed from the road, thus allowing

you to complete your commute in a shorter span of

time. The only way those cars will be removed is if

people are given viable alternatives. What percentage

of cars is removed from the road will depend on how we develop and operate mass transit and how much we’re willing to invest.

Mass transit would be a boon to the economy. Money

that would otherwise go to the purchase of gasoline

would have the ability to go to diverse sources and

stay within the local community, thus having a greater

multiplier effect, instead of going directly to the

coffers of the oil companies, perpetuating the cycle

of concentration of wealth in our society.

A person would be able to pursue greater sources of

employment because he or she would not be dissuaded from the driving commute or from having to ride 3 different buses and take an hour and a half to get somewhere. Mass transit would free us of the burden of having to invest thousands of dollars in a car that pollutes the air we breathe, just to be able to pursue a living, or just to be able to move around in an

efficient manner.

An additional benefit for all of us would be reduced

pollution, as well as reduced medical costs due to the

respiratory illnesses caused by pollution, which we

all pay for. It is just to increase gasoline taxes

because its consumption uses up a vital resource at

great cost to our society, without reinvesting enough

back into our society.

There are those who will attempt to frame this as an

"us" versus "them" issue. Why should drivers have to

pay higher taxes to subsidize the use of mass transit?

This is a "we" issue. A lot of people in urban centers

both drive and use mass transit, and in the near

future, the only manner in which our society will be

able to sustain itself, is if the vast majority of us

do both, or just use mass transit.

This is one of the greatest opportunities to think

globally and act locally. Our actions can have

tremendous impact. As an example, what other region of the planet consumes more gasoline than Southern

California? What other region of the planet has a

greater impact on global warming? We do not have to

wait until we have a President that understands

science to do something about this problem.

With the passage of Proposition 42 in 2002, the

current state tax on gasoline now goes directly to

fund transportation instead of going into the general

fund. Beginning in 2008, 20% of this tax will go to

fund mass transit. Prior to 2002, the State

Constitution prohibited the use of the gas tax from

being used to fund the operational costs of mass

transit, it could only be used for construction and

maintenance purposes. However, it is unclear whether

Proposition 42, which was an amendment to the State

Constitution, authorizes the use of the gas tax to

cover operational costs because of its ambiguous

language, according to some legal scholars such as

Patrick Bergin, whose analysis is viewable online.

Whatever the legal issues are, the State Constitution

should be constructed to allow for the development and operation of fast, efficient, reliable mass transit in

California. Additionally, it should be constructed to

allow Californians, if they so chose, to impose an

additional 10 cent, 20 cent, or 30 cent tax on

gasoline that in its entirety would be dedicated to

fund mass transit.

Besides just relying on the gas tax, communities

should be allowed to impose local vehicle licensing

fees, which is one of the ideas mentioned by Andrew

Sullivan in his article. Local communities should also

be able to legally impose a gas tax higher than 1 cent

per gallon. If the solution I have described cannot be

implemented on a statewide level, it should be legally

possible for local communities to do this. There is

enough wealth and consumption of gasoline in Los

Angeles county to fund a world class mass transit

system. We can make great strides towards improving

traffic, pollution, and the economy with local

resources.

Apart from this, mileage based car insurance should be made legally possible in California, which it

currently isn’t. People who drive less, instead of

being rewarded, subsidize the rates of people who

drive a lot. A situation which is unjust and

counterproductive to society’s stated goals of

reducing petroleum consumption, traffic, and

pollution.

If we are serious about solving society’s problems we

must be openminded. One should be selective about

which tax increases one supports and for what

purposes, but the position of being against any and

all tax increases is irrational and impractical. It

limits our ability to solve problems. It is a

ludicrous position for any politician to have.

We must make up our minds whether we truly want world class mass transit for our cities. Not having a steady funding stream guarantees that it won’t get built. Having a steady funding stream creates the possibility that it will get built.

A sustainable future is one with fast, efficient,

reliable mass transit and where a car gets 50 miles

per gallon, and its consumption of a vital resource

such as gasoline is taxed at an appropriate level. The

alternative is to make ourselves beholden to the third

tenet of the Republican philosophy: TAXES ARE BAD!

TAXES ARE BAD! TAXES ARE BAD! Dear Father who art in Heaven, please free us of taxation, give us the

patience to be able to tolerate traffic, bless us with

good health so that the polluted air we breath won’t

harm us, stave off the greenhouse effect until we are

old and on our way somewhere else, and let our

children and grandchildren deal with it then(with your

guidance of course). Please sustain the dollar so that

the stock market won’t collapse and our investments

will pay off handsomely. And please provide us with

abundant supplies of gasoline that we can purchase for less than .00 per gallon.

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