Limiting Personal and Regional Vulnerability to Energy Price Shocks

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St. Louis Gas Prices and Metro pass Price{Nominal St. Louis gas price with Metro monthly pass price – Stlouisgasprices.com}

The recent price spike in propane reminded me of the near riots over gas prices in 2008. Gas topped $4/gal in St. Louis in July of 2008 and quickly collapsed along with the economy later that year. Since then it has crept up, briefly hitting the 2008 highs in 2011. Is there anything individuals and the community can due to combat these price shocks? Absolutely.

When demand is inelastic buyers will pay nearly anything for a given product. Think insulin. When demand is elastic demand changes a lot in response to price. Unfortunately due to individual choices and government policies we have made our demand for gasoline very inelastic. This leaves us vulnerable to price shocks. For many they just have to put up with it.

In other areas of life we have choices that help us avoid price shocks. If beef prices spike, we buy pork. Businesses hedge against price shocks. Airlines buy fuel futures not so much to get a lower price, but to get a certain price. They can plan around a certain price. Metro does this too for its buses.

Volatility of energy prices affects consumer budgets and undermines consumer confidence. This is also bad for a local and state economy that marginally participates in the industry, rather it sends its wealth away to distant places.

What can an individual do? Shorten your commute. By cutting your commute, a lower percentage of your budget goes to gas and thus you are less vulnerable to price shocks. Even better if you can use an alternative like Metro, bicycling, or walking for some of your trips. Of course there are many variables that go into one’s housing decision of which gas is one factor. For the region and state this is yet another reason not to encourage long commutes via unwise infrastructure spending.

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  • j

    The Metro Pass nominally is the same price but when accounting for inflation it should decline in price over time since Metro does not adjust it for inflation each year.

  • Alex Ihnen

    The potential impact of incremental change shouldn’t be understated. It can be tough to live without a car in St. Louis, depending on children, work location, job type, etc., but we could all drive less. The commute is perhaps the biggest factor, but job sprawl makes even intentionally choosing a shorter commute a challenge. But we could certainly all drive 10% less. IMO – the problem is that the further from people/activity one lives, the more one is compelled to drive, whether to the story, a bar, or an event.

  • Imran

    Could drive an all electric vehicle I guess.

    • matimal

      Or we could move to places that are more central to our lives reducing the distance we have to travel.

      • Imran

        I thought the concern here is about hydrocarbon dependence , not the distance traveled. For instance what if everyone road bikes to workplaces miles away? ( I am all for containing sprawl btw)

        • rgbose

          Not so much. I would write the same thing if our cars all ran off of electricity generated by solar panels outside of the region and state if its price was as volatile. It’s about how our car-oriented infrastructure and development patterns have left most of us little choice but to put up with these price shocks.

        • matimal

          Their inseparable.