For what it’s worth I cannot find evidence that this paper was ever published, so I think it’s safe to say they did not convince the rest of the profession that this was the (or even a) trigger.
I’m sure it’s being shared to suggest that high current gas prices will do the same now. I doubt anyone has any good reason to be confident in such a suggestion.
Hi, I’m the OP. I shared this because from a practical perspective it seems that filling a car’s fuel tank is one of the most volatile and essential line items in a typical household budget, and when expensive housing (owned or rented) stretches household budgets, prolonged increases in gas prices could feasibly be a “straw that breaks the camel’s back”, as another commenter mentioned. I appreciate the far more educated perspectives available on HN, so given some of the current parallels (expensive housing, rising prices) and some of the much more unfortunate new variables (war, inflation, supply chain), I wanted to raise the topic for discussion.
I personally think that trends like increased EV/hybrid ownership and WFH could mitigate this issue in particular, but I don’t think these are trends that apply to all Americans equally (especially those with more precarious finances).
> filling a car’s fuel tank is one of the most volatile and essential line items in a typical household budget
With work-from-home I'm finding that this is absolutely not the case anymore. I do walk a block every few days to buy simple groceries that I didn't used to do. This isn't about the car and mostly as a way of making up for the exercise I don't get by going to the office every day and associated incidental walking/meandering.
The FedEx/UPS/Amazon/Doordash vehicles still require fuel. The trucks bringing food and supplies to your local grocery store use fuel. The fertilizer used to grow your food required fuel. The construction and maintenance materials for your current dwelling require fuel. The plumbers, electricians, cleaners, trash collectors, locksmiths, etc require fuel. The container ships that transport good from China require fuel.
Literally everything you use in life, even if you're the most shut-in Hikikomori on the planet, is downstream of fuel. If the fuel cost increases are transitory, you might not notice it. But if they persist, you absolutely will.
Yes, the cost of energy has been important since the 1970's energy crisis. That fact doesn't add much to this conversation. I thought that the point being made was the direct use of fuel was a major line item in personal budget (or near-direct if substituting Uber rides for own car) which doesn't have to be the case.
I actually felt that sharing this provided a more credible starting point for the discussion than my own viewpoint. I did not think to confirm whether the paper had been published so I’ve learned my lesson on that.
To be honest I’m a bit surprised by the strong reactions as today’s news is filled with different perspectives on the economic consequences of higher gas prices (as unimportant as that is relative to the war in Ukraine) but I appreciate the feedback. There’s no intent to be dishonest or self-serving here but I’m sorry if that’s how it was construed.
They are somewhat right, but for the wrong reasons.
If energy prices were at all responsible it is that in late 2008 when the central bank had its planning meeting, they were looking at Core Inflation. In that meeting they decided to raise rates because they thought inflation was a little high. This was because of high energy prices in their core inflation metrics.
You can actually go back and read the minutes of those meetings. As Scott Sumner writes:
> And many forget that the United States was not zero bound during the great NGDP collapse of June to December 2008; indeed, interest rates fell to near-zero levels only in mid-December. Consider the Fed meeting of 16 September 2008 two days after Lehman Brothers failed. The Federal Open Market Committee (FOMC) voted to hold rates at 2%, citing an equal risk of recession and inflation. The risk of recession is obvious; we had already been in recession for nine months. But why the perceived risk of high inflation? By the day of the meeting, five-year TIPS spreads had fallen to only 1.23%, far below the Fed’s 2% target. In fact, the real risk was excessively low inflation, not high inflation. The Fed should have cut rates dramatically. Why was the Fed decision-making so misguided? It adopted a ‘backward-looking’ policy, focusing on the relatively high inflation of the previous 12 months (mostly due to high oil prices that were already plunging by the time the Fed met). It was like trying to steer a car while looking only in the rear-view mirror. A forward-looking policy would have allowed the Fed to be far more aggressive.
There would maybe still have been a small recession and a housing bubble in some states, but the real failure was to not react to the liquidity demand and in 2009 there was a deflation. This is the real cause for the majority of what we now call Great Recession.
> "The key word is, 'triggered,'" said JunJie Wu, an OSU economist and one of the authors of the paper. "This theory recognizes the role of subprime mortgages and lax lending practices as inflating the housing bubble, but high gasoline prices provided the trigger that burst the bubble."
Are we in another bubble? And if so what is the theory for why? I assume subprime and lax lending wouldn't be the cause after the lessons learned from last time
Not a bubble because for the most part people are buying homes that they can pay the mortgage on.
High energy prices are also going to spike inflation which eventually means rates rise. If that happens owners with their 2.75% mortgages aren't going to be inclined to sell. Coupled with higher new construction costs the housing market probably continues to rise.
They can pay those mortgages in the moment they sign for them.
They cannot necessarily pay those mortgages after inflation screws up the rest of their month to month budget.
People always love to circle jerk about inflation "inflating away your mortgage" but that's only if you manage to hold onto it.
Wages lagging inflation will still hurt a lot of people. "Just switch jobs" doesn't work in every industry and even where it does you're gonna stagnate in terms of skill/experience due to ramp up times in new roles so you're basically borrowing from your future earning potential by doing that. <Insert ye olde quip about "10yr of experience being a junior developer vs being a senior developer" here>
Unfortunately most people who championed the bad decisions that got us here are wealthy enough to weather the storm with little more than reducing their retirement contributions.
It is also funny that people think banks do not want you to default on your mortgage. What did they learn from 2008? They can hand out mortgages ignoring valid economic signals that these people will not be able to repay it, they will then get your house and the government will bail them out and make laws against sleeping in a public place.
Houses are worth far less if they are foreclosed on or left without upkeep, so everyone loses money. There is no universe where banks want to take over a house and deal with the overhead of foreclosure and reselling instead of keeping the monthly revenue stream they signed up for.
> owners with their 2.75% mortgages aren't going to be inclined to sell.
Or able to sell.
This is the other side of historically low rates pushing home prices up by allowing people to pay higher prices while keeping their mortgage payment affordable. If (when?) rates go back up, that may cause prices to fall. This could also put people underwater on their homes, and even trigger another (hopefully smaller?) wave of foreclosures if they suddenly can't make payments anymore and also can't sell the house at a price that will cover the remaining balance of their home loan.
This is crucial. Many people sometime need to sell. When people cannot buy it they lower the price. When they lower the price the valuation of neighboring houses goes down. If people also have less money saved because of higher oil prices, well, they another compounding factor.
Rates are going to go up, and it is much to late in the game for them to rise without serious repercussions.
The "bid" order book is extremely deep though. Lots of people priced out that are willing and able to buy at lower prices. So it's unlikely the we get into a bubble popping situation. Worst likely case is static nominal prices while inflation erodes the real prices.
The only sort of cataclysmic risk out there is a change in government regulations. Zoning changes, Prop13, or some action banning investors owning SFHs. But none of that seems remotely imenent.
In 2008/2009, there were also lots of people who were previously priced out, but that didn't help stem the tide of foreclosures. The depth of the "order book" is far from the whole story when you're dealing with an illiquid, non-fungible good that's also encumbered by a lien.
Here's a concrete example that I can take from my own life experience: there was a house we were quite interested in buying. The house's realistic value for the market at the time should have been something we could afford. But the owners simply couldn't let it go for less than about $50,000 more than that, because that was the price at which they could pay off their home loan. So, too bad, no deal. And apparently nobody else would buy it at that price, either. About a year later, this gorgeous, well-cared-for house was foreclosed on, and then at some later date people broke in and ripped out all the copper and whatnot, and so this house eventually got auctioned off as a rehab/teardown job for a (presumable) fraction of what we would have bought it for.
Gasoline is a big trigger because it's a variable expense for people living on the edge of what they can afford.
People are really bad at risk management. So when you have a couple pulling in $200k/yr with some crazy mortgage on their $800k house, commuting 30 miles in their 17mpg SUVs, each $1 in gasoline cost increase adds $150/mo in monthly expenses.
There are lots of people like this, many of whom are in weird stress situations already because of issues with COVID and school, etc.
> Not a bubble because for the most part people are buying homes that they can pay the mortgage on.
I think you're right that this won't be an exact repeat of 2010 — that era was just crazy for anyone who understands financial responsibility, more like a precursor to the cryptocurrency number-goes-up salesbros now than the current market — but there are some worrying factors I'd consider before buying. I don't think most of these are national in impact but I'd expect some big regional shifts which could be quite hard to handle for some cities, especially if they haven't been doing a good job on their finances already.
1. A lot of those high prices are anchored on demand in certain areas. If younger generations are successful in getting zoning rules changed to allow density, that can add a lot of competition and there are many hopeful buyers who would prefer, say, a new apartment/condo in a city with many things to do to an older (higher maintenance) house in the suburbs. I think this one is long-term enough that most buyers will be bailed out by inflation but it could at the least prove a major upset for the people who are skimping on things like retirement in the hopes that they'll get a massive equity boom like their parents did.
2. Remote work is here to stay — not 100% but enough to cause shifts in buying habits.
3. Most American home buying is predicated on cheap fossil fuels. If that inflation spike eventually leads to higher pay, this helps on mortgages but in the meantime it puts a lot of strain on anyone who can't just soak up their commute and heating costing a whole multiple of what they previously did. Expect a bunch of SUVs on the used market if the current spike lasts for very long, just like in 2010. That cuts down the number of buyers sharply for outer suburbs.
4. Climate change isn't going away: again, not a national bubble but there are areas (e.g. South Florida) with a lot very pricey real-estate which seems unlikely to be able to maintain that value. That includes things like flood insurance, coastal erosion, etc.
5. The classic suburban model isn't really sustainable: the initial work by developers and tax rates set when maintenance is the cheapest are going to require hefty rate increases as infrastructure ages or needs to be adapted for climate change, but the more people are paying for their houses the more they're going to oppose things like property tax increases or be unable to pay them.
> 2. Remote work is here to stay — not 100% but enough to cause shifts in buying habits.
This is one thing that could start a collapse and it is why many real estate companies are pushing a "office work is needed for collaboration" narrative. The real estate market for offices
The commercial real estate market is recovering but remains weak compared to conditions before the COVID-19 pandemic, according to NAR commercial members who responded to the 2021 Q1 Commercial Real Estate Quarterly Market Survey and industry data.
The cost of living increases are heavily driven by housing prices, which they’ve already locked in for themselves.
Unless unemployment spikes dramatically (the opposite of what’s been happening) and they lose their jobs and they bought homes on the ragged edge of what they could pay monthly, this is unlikely to be an issue.
There's a delicate balance... if interest rates rise to control inflation, prices will drop and the 2008 crisis demonstrated that many will just walk away from their homes, which triggers another round of price drops.
>> They get to pay back their loans with cheaper dollars
but they also have to pay for energy, food and automobiles, all of which is going up much faster than the average person's salary.
imo, the first area that is going to take a hit is in consumer discretionary spending - people will hold onto their tv's, smartphones, computers and a lot of other things longer than usual, because the things they have to buy (food, energy etc) are all going up dramatically. An awful lot of people live paycheck-to-paycheck and spend at least 100% of everything that comes in each month. Where my spouse works, 2/3's of the employees are in a panic if their paycheck is a single day late; they just don't have a cushion to fallback on.
Consumers cutting back on the 'extras' will be the first domino to fall.
This is very simplistic. If wages do not rise this doe snot help the borrower. And rising inflation will probably mean a higher risk of that same person becoming unemployed.
It can't be discharged through bankruptcy (thanks Joe!), but neither can we squeeze blood from stone. Debtors who don't have the funds to both eat and make their payments will not make their payments.
Student loans haven't been something you can discharge in bankruptcy since the 1970s. If you want to thank a US president (as opposed to, say, the legislature that actually passes these laws), you should be thanking Gerald.
They are probably referring to then Senetor Joe Biden and his support for the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act, which substantially broadened the set of student loans that could not be discharged in bankruptcy.
You can still discharge private student loan in bankruptcy until 2005, when a new bill pass to prohibit it. Joe Biden was one of the Democrats voting for it (as a member of the legislature that passed the law). The GP was probably referring to this
Joe Biden was a legislator for 38 years. He probably doesn't remember every bill he sponsored, but it's not as though he didn't choose to sponsor them.
I'd really like to know why this is getting negged. Student loan debt is a massive number, and if significant numbers of people simply stopped paying, it going to have a major toll.
Student loan debt has been in de facto default for awhile now in terms of collecting the interest payments. So we already "know" the impact that would have. It also CANT be defaulted in the sense of extinguishing the debt, because the government will just garnish future wages and earnings, including social security checks.
Well, house prices have gone up far faster than incomes, for years now, in the US and also several other countries around the world. One driver is the purchase of real estate as an inflation hedge.
This doesn't prove it's a bubble, but it sure does suggest strongly.
Housing in the Toronto area has been even more insane than usual the last few months. Houses an hour away from downtown that were selling for ~850k in November 2021 were selling for $1.05M in January and February.
I live two hours from Toronto and a house in a bad area of town that I personally know was a crackhouse 2 years ago, sold for slightly under half a million and is getting gutted and renovated into a duplex.
Last time I was in the house, crackheads were shitting in buckets. Literally.
Is there a convincing explanation of why the US and Canadian markets behaved differently? Were Canadian banks smarter about what loans were issued? Not being a Canadian, most of the stories I hear about Canadian real estate are about international investment by the global rich -- is that a large enough share of market to support prices even through a recession?
Canadian economy is less diversified and overly reliant on housing as a component of GDP, so policy has been distorted by the housing market and the corruption/money laundering that goes along with it.
Had to read half the article before the word "gasoline" appears, indicating that the gas in the headline is vehicle fuel and not heating gas. After reading the whole thing, I'm still not 100% sure.
Gas is short for gasoline, which is what we're putting in our cars. Petrol is short for petroleum, which is not what Europeans are putting in their cars. Remind me again which colloquial wording makes the most sense?
Well I dunno, last time I checked by far most of Europe does in fact not call it petrol. I can't claim to know which word is most commonly used, but as an anecdote the dutch call it "benzine" which is also "wrong" but in a different way from both gas and petrol.
Seems to me no one can figure out what the proper name for this stuff ought to be :P
gasoline -> gas at least has a certain logic to it, even though "gas" is unfortunately already a word that means something rather opposite. "Petrol" has always seemed strange to me, too, though, since nobody pumps black sludge ("petroleum") into their car but rather the clear, fluid petroleum distillate called gasoline.
I got curious, and "Gasoline" apparently comes from "Gazoline", which Samuel Boyd used to avoid trademark infringement with Patent Cazeline Oil (for use in artificial light), which was named after John Cassell. [1]
Well, high energy prices meant that when Lehman Brothers was collapsing in late 2008 the most recent data the Fed had said that inflation was running above 5% and they thought they had to be careful about that. In reality deflation had already started but it takes months to collect and process the data to show that. Fears that injecting money into the financial system would further stoke inflation made the Fed ask for and receive the power to pay interest on banks' excess reserves, to encourage them not to lend out the newly created money. This had never been tried before, the Fed didn't have any experience using this tool, and it seems that they set the interest rate they were paying banks to not lend out their money much too high.
As someone who worked on the inside of the mortgage industry at the time
(software and db) there is no doubt in my mind that the crash would have happened even if gas was at $1.
Insane loans were granted then loans bundled, sold, rebundeled,sold and so on.
The more established banks that bought our loans did zero due dilligence,
they just boundled things up and sold them.
We usually only had the loans less than 48h.
Wells Fargo (one of the banks that loved our loans) usually max of 96h
usually less.
We would sell loans that had $1500 - $2000 payments per month to someone
living in an appartment just able to afford $400 in rent.
Towards the end, we started having mortgages pile up that we could
not sell, and so we had to actually service them.
I think somehow the boss managed to give them away to some other entity
because we had 0 infrastructure, software, procedures to do it.
The boss and founder managed to sell the business about 3 months before
the big bang.
I quit 6 months prior. Glad I did.
I feel guilty and ashamed that I ever worked at that place.
It did not even pay very well.
The sales people made enomous bonuses if they were able to make sales.
People are extremely sensitive to rises in gasoline prices because they are so visible. But the crisis was triggered by a wave of people bidding prices on houses higher and higher, taking out loans they couldn't afford, hoping to flip or accepting balloon payments they thought they could escape by selling at a higher prices, because home prices are guaranteed to go up, right?
Some people bought houses a very long way from their jobs and may have been hurt by an increase in gasoline prices in some areas, but if so, this only affected the timing of the crash, perhaps moving it up a little. It was an unstable structure that was guaranteed to fall apart.
Now we have high oil prices (not yet at the high) also with general (corporate induced) inflation, combined with an even greater separation of wealth. All things that point to a a recession again. But war is the variable here.
I don't have the figures handy, but based on what I am seeing I suspect we are entering a period of the biggest wealth gap in recent history between the rich and everybody else.
Massive, massive asset inflation, for those that own things - and the bigger and more you own, the more you have benefited, and then massive inflation in consumer/everyday products like food, energy and clothing and for those seeking to buy their first house, as well as renters finding out the rent is being jacked up rapidly - i.e. the people who can afford inflation, are seeing massive gains in their asset portfolios, and the people who can least afford it - are on the verge, if not already at, a disaster in the personal economic situation.
We are heading for a train wreck of massive proportions imo, best to get prepared if you can.
I feel this. 2021-2022 has been insane as a person looking to buy a new house, car, and get kids into daycare. Luckily we already own a house with good equity, have a good car, and have childcare. But we’re looking at moving and upgrading a few of these things, and let me tell you. The demand for housing and vehicles is beyond anything I could have imagined. Houses routinely selling for 30-50% over list. Car dealerships selling new cars at $10k over MSRP because the two year old version of that car is selling for the price of a new one used.
If we didn’t have existing assets like a house or quality cars we could trade in I don’t know what we would do. Just having two good salaries, a lot of cash, and high credit isn’t cutting. You need assets.
You say "government prints tons of money" like that goes to the people and not to the corporations.
See, inflation would not be a problem if wages kept up with rising prices. But they do not? Why? Because profit and stock buybacks. Corporation are not paying you a fair wage based on the cheapness of the money they can get from the fed. Instead of keeping profit stable they aim at not raising your salary and keeping that profit so their company looks better and their stock price goes up.
I guess you still believe in trickle down economics?
Yes, this time it's a stuff shortage, not an oversupply of money. But the central bank still wants to raise rates, which is silly. The current prices and shortages are a result of longstanding policy, just not monetary policy.
I’d claim inflation responsibility is on both sides. I forget the number off the top of my head, but a rather large proportion of the price increased were collected as profits. Given that a number of industries are dominated by a handful of large conglomerates, the incentive to price products competitively seems rather low.
However, this is also correlated and reinforced with the actions of the federal reserve for a number of reasons.....
Taking a car that does 25mpg, at $2/gal gas you can do a 100 mile round trip commute each workday for $160/month in gas. At $4/gal it goes up to $320, etc. That doesn't seem like a big enough jump to me to cause people to default en masse on their mortgages and trigger the crisis - compared to the teaser rates which probably made mortage payments jump by $500-1000+ when expired?
Higher gas (and petroleum product and energy in general) prices have a lot of knock-on effects on prices beyond just the cost to make a commute. The costs of delivering goods goes up, higher energy prices means lower profit margins for virtually every industry, etc.
I agree. But then again, most of my knowledge of the housing crash comes second hand. It didn’t impact my parents (rural area, one mortgage), and I don’t personally know anyone that defaulted or had their parents default.
On the other hand I acutely remember the gas prices at that time. I was a senior in high school and filling up my tank was something i specifically had to save a decent amount of money for.
So perhaps that was the bigger issue, but it does feel like an insignificant amount of money in the grand scheme.
From memory, people were getting large mortgages they couldn't afford once the teaser rate had expired (usually 1 - 2 years). The reason they were able to get these mortgages is because lenders were doing little or no due diligence.
This did coincide with a period when fuel prices were rising but, I think, this was more a case of 'the last straw breaking the camel's back' rather than a direct causation of financial distress.
Yeah well so its 2022 and we have another house bubble at least as big as the one in 2007. And oil prices are sky-rocketing. Do the math. I do not know about you but I am not buying property in this market. Market is meant to crash if we follow the logic from this article. But I could be wrong. Do not take my advice
High gas prices certainly preceded the housing crises, but good luck convincing anyone it caused.
Very subjective opinion ahead- High gas prices is probably this single most effective way to curb greenhouse gases and I am shocked that Biden and his climate Czar aren’t embracing it. As it stands, even prices doubling or tripling, I would conjecture that a very significant portion of Americans can make significant changes to their driving patterns at the great expense of a mere “minor inconvenience”. Carpooling to work and school, taking mass transit where available, planning errands/trips for efficiency, driving the more economical car in the family unit when no one else is using it (I.e. drive the wife’s wagon on the weekends instead of the big truck). A LOT more people can be driving motorcycles/ scooters. Complaining about high gas cost is almost a form of conspicuous consumption.
At least around city, most people do not think twice about fuel cost of running errands all over town, they just complain about the bi-weekly fill up. For one example, some families schlep their kids all over the city every day for a very packed schedule of events; carpool more or just don’t design up for such an erratic day from the first place. Don’t sign up for that basketball league with a daily practice on the opposite side of town from school. Don’t take as many YOLO trips up to Lake Tahoe or Napa or whatever… or at least pile in with other people to reduce the number unit cost.
Until people begin to reorganize their livelihoods and consumption patterns, then gas prices aren’t really too high, it’s just more than we are used to spending, and I’m not at all convinced an extra $100/mo at the pump is really that big of an impact for majority of folks to behave differently. We just complain instead.
(Caveat- Low income workers have a different story, but I anecdotally also don’t not see an embrace of more efficient transport means amongst low income population in my city. Late model luxury vehicles and large suvs and trucks remain very popular in low income areas. Gas cost is simply not a significant enough portion of the equation as it stands)
> High gas prices is probably this single most effective way to curb greenhouse gases
Partially. The problem is, if you allow (or introduce) a high gas price as a politician, you'll be causing social unrest - and that not just in the US where having a car is mandatory outside of the core of urbanized areas, but also even in modern places like France where precisely that was the cause of the infamous Yellow Vest riots. And that social unrest can deal way more damage long term than the GHG emissions you'd save - social unrest is how the 45th took power. Imagine a repeat of the 45th (or someone even worse)... say goodbye to anything done on the political side to curb GHG emissions.
> taking mass transit where available
Yes, the problem is that you'd need reliable mass transit in the first place. And in many areas - again not just in the US but worldwide - mass transit is either not existing at all outside of urban areas or very spotty (i.e. once in the morning and once in the afternoon as school bus). Governments will have to take a lot of money to build out that first. And in urban areas, the side effects of large homeless and/or mentally unwell people makes mass transit pretty unattractive, so again governments will have to take even more money to fix that mess.
We're all sitting on decades worth of political ignorance and now climate change, Putin and a lot of the population (the ones who deny climate change) collide together in a perfect storm event. And I'm not sure which way out it will take.
Gas prices have been from the $2.00 to the $5.00 mark for the past decade. Adjusting for inflation Gas is getting relatively cheaper but the last time it actually changed consumption it would be around 2008 so it was at the $5.00 mark ($6.55 a gallon).
Biden just released the national gas reserves which is an attempt to keep prices lower. For a long time it has been said that we have to change peoples behavior to solve the global climate crisis but that seems unrealistic and I think instead we should invest in large scale carbon sequestration projects. Telling people what to do doesn't go over very well for anyone.
Just let gas prices be higher than we are used to, people will figure it out for themselves. Blame it on Russia, Saudi Arabia, ramp up local production and call it a day.
I recently sold my large luxury SUV in exchange for a smaller sedan ( that happens to be electric). I’ve always thought I needed a large SUV to do the things I want to do, so far nothing is changed. I personally made a huge quantum leap in personal vehicle choice, tesla convinced me, but frankly the new car could’ve been a more mundane sedan and still saved me a fortune. Lots of low hanging fruit out there if gas prices really are “too high“
The average electric car transaction was $63k in January, compared to $26k for a compact car and $34k for a crossover.
Americans already tend to buy way too much car, financing them over 60 or even 72 months, and that was happening before the incredible price increases over the past 2 years. Only the (increasingly small) upper middle class and above can responsibly afford an electric car.
Even expecting the general public to be forced to switch to hybrids and more fuel efficient gas cars is unrealistic in the short to mid term as the supply simply isn't there. Letting gas prices be higher than they used to be to incentivize electric car adoption could be a logical step, but likely in 3-10 years when prices are comparable to existing technology.
If I’m following correctly, I think what’s missing from your comment is that a Kia Rio is $17k brand new and includes carplay, gets 36 mpg combined, 10yr 100k mile warranty, and doesn’t bother with complicated/expensive hybrid or battery.
To your point, people just don’t want that car because… cars play into one’s identity and style (at least marketing tells us it does). But that shouldn’t drive our geopolitical oil and gas strategy. Neither should the fundamental expectation that USA should be guaranteed the ability to drive 100 miles on $10 worth of gas in the average vehicle sold.
The more EVs penetrate the market the less vulnerable we are to oil price spikes. Oil has been the rate limiting reagent of our civilization. That is ending.
I feel like EV market penetration would need to be pretty insane for a society to be less vulnerable to oil price spikes. For context the US is around 5% EV penetration currently. I don't think that number includes recreational vehicles like RVs, motor boats, motorcycles, ATVs, 4x4s, etc. (most with 0% EV penetration).
But then you have the aspect of electricity generation. Did you know that the US currently generates 4 times as much electricity from oil as most renewables only excluding nuclear (hydro, solar, wind).
Our society is steeped in oil, it's beyond cheap, and there's no indication it's ending any time soon.
Did you know that the US currently generates 4 times as much electricity from oil as most renewables only excluding nuclear (hydro, solar, wind).
This is incorrect. As of 2021 the United States generated about 0.5% of its electricity from petroleum. It generated 9.2% from wind, 6.3% from hydro, and 2.8% from solar.
I know this is sarcasm but for those people with big pickup trucks (I should say vanity trucks, not real work machines), you’re looking at 26 gallon tanks @ 4.20/gallon. If they’re doing that once a week (conservatively) plus a presumably large truck payment, they could more than pay for a Tesla all other things aside. I personally lease a Kona Electric which after rebates and incentives costs me ~$350 a month
+1 It's been almost two decades since the last spike, five since the oil crisis of the 70s. If you're buying 50k plus gas guzzlers, and then get squeezed when gas prices are going up, it's almost self inflicted by now. So many alternatives: electrics, small frugal cars, carpooling, telecommuting, ... Can't believe USA is still incentivizing this madness.
No, my comment was that there's no counter-pressure to prevent people from buying gas-guzzlers, oversized SUVs and trucks and the like, that will be around for 10-20 years, and will continue to drive wasteful demand for gas. When prices rise, it's felt disproportionally in our wallets, because US's carpark are gas guzzlers on the average.
That's only possible because the negative externalities are not priced in.
You can get from point A-B in supreme comfort, in cars that cost half that, or that have twice the mileage. The reason cars are instead bloated and have low mileage is because of American's fetishization of size, and the ratchet of the safety arms race. To break out of this tragedy of the commons, the tax-code needs to incentivize smaller cars, electric cars, flexible work-arrangements, etc... and disincentive larger cars.
And to your point; those stupid poor people (your words) buy used cars, and these used cars were originally the wasteful new cars that the selfish sociopathic rich people (my words) bought.
I have a truck that I got for cheap (under $4k) and never used as my main commuter car back when I was still commuting, but there are some very practical differences between a truck and a Tesla that most people wouldn't want to give up. Mostly in the form of cargo capacity and towing capacity. As stuff like the cybertruck and f-150 lightning trickle down into the used truck market they'll get more affordable to the average Joe, but for now it's out of reach for a lot of people. I do agree with you though that the people out there blowing $40k+ on a vanity truck could definitely go with an electric (or a much cheaper normal pickup)
Yes I don’t mean to target anyone with real uses for a truck, more those using them to commute. I personally find myself wanting one all the time as a homeowner but can’t seem to justify it personally for the two or three times a year I would actually use it!
It's an entire economy. When someone else buys a Tesla, oil demand is rendered less inelastic. This also primes the market so that more EVs get sold, including cheaper ones, and eventually used EVs become available at a much lower price.
You can get a used Nissan Leaf for <$10K now in good condition with enough range for most commuter needs, and those things are super reliable and require virtually no maintenance.
I guess we should not do anything if it can't immediately be made affordable to everyone in the very first generation. So we should never have done ocean travel, air travel, non-emergency medicine, higher education, personal computers, ...
so what you are saying is you are in favor of trickle-down economics? - where people who make $300K+ a year, buy government subsidized Tesla's, and somehow, somewhere, the poor single mother who now has decide between filling her car to get to work, and buying food - will somehow benefit from wealthy tech-bros driving $100K cars.
I agree that current inequality is excessive, but the argument I made applies if there is any inequality at all. There has never been a human society with absolutely zero inequality. If there is any inequality at all there is always some "trickle down" effect in the form of aftermarkets, priming of industrial production leading to future lower prices, etc.
It's possible to simultaneously acknowledge certain "trickle down" effects and believe they can be beneficial while also being in favor of reducing inequality.
No, EVs are not just Teslas. As far as I can see in The Netherlands, EVs are penetrating the market very fast. Sure, it will begin with people who can afford the upfront costs with an eye on operational cost savings. But, it will only be a matter of time before the economies of scale applies and the value of an electric car with substantially lower operational costs become the better choice for those with current gas guzzlers(including me).
I am not running out to buy an EV now because I have a car which is a tool that works fine, and the alternative is more expensive. However, in a few years when I am in the market to replace my car, the EVs will be much more attractive when I calculate the total cost of ownership.
In the EU, the DACIA Spring is sold at 20 to 18k€ before all the government credits. You can get this urban electric car for less than 12k€ with the government credits.
Yes this is a very simple car, but this is now less expensive than a similar gasoline car.
the idea is that the EV market will continue to slide towards entry price. the used EVs market should follow suit, so, those poor people would also have the choice to replace their fossil fuel vehicle with an EV to avoid being at the mercy of oil prices.
not that I think the theoretical reasoning will work, but it is at least plausible, and not only for consumer vehicles.
For what it’s worth I cannot find evidence that this paper was ever published, so I think it’s safe to say they did not convince the rest of the profession that this was the (or even a) trigger.
I’m sure it’s being shared to suggest that high current gas prices will do the same now. I doubt anyone has any good reason to be confident in such a suggestion.