June 10, 2008
American Consumers Newsletter
from Cheryl Russell, Editorial Director, New Strategist Publications
If you have questions or comments about these editorial, e-mail New Strategist at email@example.com.
Trapped in Gasoline Ghettos
OK, this is bad. The rapid rise in the price of gas is turning the nation's far-flung rural and suburban areas into gasoline ghettos, locking millions of Americans into houses they cannot sell, far from their jobs, with little hope of escape.
Even before prices soared, gasoline consumed a large portion of the household budget. In 2006--the most recent year for which there is household spending data--gasoline ranked sixth among items on which the average household spends the most. Back then, the average price of a gallon of gas was less than $3.00. Those were the good old days. With gasoline now above $4.00 a gallon, it is likely the fourth most costly item in the household budget, behind only Social Security deductions, mortgage interest (or rent), and car payments.
This is worse than ouch. Gasoline is the blood supply of the sprawling American lifestyle. Here are the facts: most of us drive to work, and three out of four workers drive to work alone. The average commuter spends 25 minutes getting to his job. Many are in the car much longer. Twenty-one percent of workers live 20 or more miles from their place of work. Among the unlucky workers who live in newer homes (built in the past four years), an even larger 29 percent live at least 20 miles from their work, according to the American Housing Survey.
Those newer homes are the epicenter of the housing crisis because of their distance from jobs. According to an analysis (pdf download) by David Stiff, chief economist for Fiserv Lending Solutions, single-family home prices are falling the most in areas farthest from employment centers. "Because of sharp increases in gasoline prices, living closer to work has become an even more important consideration in the location decisions of homebuyers," says Stiff. He maps housing price changes from the price peak through the first half of 2007 in two metropolitan areas, showing how prices in Los Angeles and Boston have fallen the most in the outer rings. The future doesn't look bright either. "When combined with large inventories of unsold housing on the edges of urban areas, this shift in preferences will mean that prices for homes in outlying neighborhoods will continue their more rapid decline and will be slower to rebound when housing markets finally start to recover."
On top of this bad news, most of the millions living in gasoline ghettos have no alternative but to drive. Only 54 percent of households in the United States have access to public transportation, according to the American Housing Survey. Among homeowners, the figure is a smaller 47 percent. Among homeowners in newer houses--the houses in exurban rings--just 27 percent have public transportation in their area.
If we are lucky, the spike in gasoline prices is only a bubble, which will deflate once speculators withdraw from the market, or the summer driving season ends, or a new administration is in the White House. The bursting of an oil price bubble will give us time to prepare for the permanent era of expensive gasoline. We will have time to build more efficient vehicles, encourage people to live closer to job centers, and invest in public transportation. If we are not lucky, then we have run out of time, and we are about to feel the fury of all those trapped many miles from stores, schools, and jobs.
BET YOU DIDN'T KNOW
Percentage of Americans who favor requiring car makers
to manufacture cars that use less gasoline: 92.
Source: American Attitudes: Who Thinks What About the Issues That Shape Our Lives
2. Q & A
How Many Use Public Transportation?
Billions and billions. Public transit ridership reached an all-time high of 10.3 billion trips in 2007, according to the American Public Transportation Association. This is the highest level in 50 years, brags the APTA. Not to rain on their parade, but the U.S. population is also larger than ever, so it is only natural that the use of public transportation should be up. A more promising APTA statistic is this: the use of public transportation has grown 32 percent since 1995, more than double the 15 percent gain in population.
Still, the percentage of Americans who use public transportation is pitifully small. Overall, only 5 percent of the nation's workers use public transit to get to work, according to the 2006 American Community Survey. There is a good reason for this lack of use. Only 54 percent of households in the United States have public transportation available in their area, according to the American Community Survey. Narrow the focus to homeowners, and the numbers are even smaller. Only 47 percent of homeowners have access to public transportation. The figure is a higher 69 percent for renters, who are more likely to live in urban areas.
These numbers were collected a few years ago and are undoubtedly higher today. But not much higher. It takes years to get public transportation systems up and running. And we have another problem. The United States is the third largest country in the world. To make public transportation work here will require an enormous financial commitment at a time when the economy is already severely stressed. The way gasoline prices are rising, however, we may have no other choice.
By Cheryl Russell, editorial director, New Strategist Publications
If you have any questions or comments about the above Q & A, e-mail New Strategist at firstname.lastname@example.org.
BET YOU DIDN'T KNOW
Hours per day Americans spend traveling
from one location to another: 1.24.
Source: American Generations: Who They Are and How They Live