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June 26, 2008

Richard Florida

Cost of Commuting

« Time, Money, Location | Main | NPR's Bryant Park Project »

From Dave Lakeland, via the ever insightful Andrew Gelman who provides some additional data points with this graph.



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Whitney Gunderson

Here's what Csaba Csere, editor-in-chief of Car and Driver magazine, had to say on gas prices. In his August 2008 column, "When Gas Hits Four Bucks A Gallon, Logic, Research, and Analysis Go AWOL," Csere states:

"There's also precious little discussion about how the plummeting value of the dollar has affected oil prices. If we go back to the year 2000, the euro was worth 82 cents. Crude was fluctuating at about $30, or €36.5. Today, because our politicians have degraded the value of the dollar by incessant deficit spending and enacting various fiscally unsupported future programs, the euro has now appreciated from 82 cents to about $1.60. As a result, while crude has quadrupled in dollars - from $30 to $130 - it's barely doubled in euros, from €36.5 to €80. Had the dollar only maintained parity with the euro, crude would cost about $80 a barrel and gas would be less than three bucks at the pump."

So, if more people are moving into urban areas to save time, not because the price of oil is increasing and the value of the dollar is decreasing, and the "real" cost of the commute has been basically flat since 1985, does that mean the value of time is inverse to the value the dollar?


As the graphs show, the price of oil in constant dollars has been very stable since 1949. Gdp/capita has more than tripled since 1950. Therefore, if we could extend the first graph back to 1949, it would show that the price of gas as a fraction of gdp/capita has been declining.

So as a fraction of total wealth, it would seem that even with today's prices, we are spending much less on gas than during the time that the suburbs were built and streetcar tracks ripped up. To me this says that oil prices will have to go waaay higher before a widespread lifestyle shift occurs.

Btw, to extend the second graph up to present, by my calculations the price of gas today in 1996 dollars is around $2.35.


So, all this concern over rising energy prices is just a political ruse or something?

GDP per capita is a really crude (pun intended) proxy for standard of living. Not all of that wealth has trickled down. I think you may have to take into account that in comparison to the 1950's wealth is concentrated much more unevenly today and there is a trade imbalance that didn't exist then. Both factors may be making general standard of living look artificially high through the prism of GDP.

I'm not saying that entirely discredits your general point; I just don't think energy prices will have to go AS high as you might think for the American lifestyle to change. How high before drastic changes? I don't know. But as it is right now, car dealers can't even give SUVs and large pickup trucks away.

Whitney Gunderson

I'm not really sure where we disagree JJ. It's worth noting that the 1949-2001 graph shows that price of gas was approximately $1.20 in 1996 in '96 dollars. Today the price has almost doubled to $2.35 in '96 dollars, and the price at the pump today is more than $4.00 in many places. This is a major increase. The price of time is hard to peg, but energy prices are factored into everything. I don't think that today's high energy prices will drive a widespread lifestyle shift, but I do think that energy prices are factored into future location decisions. It would also be interesting to compare the real price of gas in dollars to per capita income, the price of housing, and the value of the euro, all of which have increased significantly in most cases. Csere's point is that high energy prices in the United States are due in part to the weak dollar. Although that means that the real price of energy has not increased that much, increasing energy prices are affecting Americans in a real way. If gas cost $10 per gallon, would we still be able to justify it by saying that the price in real dollars has been stable since the 1950s? I am sure someone would take this approach, but it wouldn't really mean anything to people paying the $10 price at the pump. The effect of a 100% increase is different when something costs $0.50, like gas did in the 1960s, and when something costs $5.00, like gas could in the near future.


I do think the cost increase will have an effect, of course. For example, I just moved 50km closer to work; I'm still in a community where I drive almost everywhere, but now I avoid the long distance highway travel.

I think that the period 1985-2005 can be viewed as a time of extraordinarily cheap gas. The recent cost increase has probably halted the shift towards "extreme" suburbanism (exurbanism?) that resulted in ever-further-flung and spread-out suburbs.


I think that people have realized, slowly, that they don't want to depend on the good will of the oil companies or the oil-producing countries. Buying a car with good gas mileage, living closer to work, etc., keeps you from being flung about by decisions you can't control.

But the time spent commuting is also a heavy price to pay, as is being far from home if the water heater breaks or a kid gets sick at school. And the traffic, and the lack of community out in the exurbs...

The real question is why this exurban lifestyle became such a romantic ideal for people, not why it's being questioned now.

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