The Impact of Gasoline Prices

I’m on vacation this week, enjoying the sun, surf and sand here in Long Beach New York, where we’ve had a small summer home since 1987. I’m on the West End of town, where the biggest problem over the last few years has been the proliferation of second and third cars and the difficulty of parking on the narrow and crowded streets: Until this summer. This summer the big news is the price of gasoline. In the last year and a half, the price of gasoline has doubled. In January, 2007 gasoline was less than $2.20 a gallon, today it is well over $4.00.

Most of the year, I live on Morningside Heights in Manhattan. I’m lucky enough to walk to work and don’t use my car as much as I do when I’m on Long Island. While New York has a great mass transit system, many people outside of Manhattan still depend on their cars and drive them every day. They drop off their kids at little league, go to the supermarket and use their cars to visit friends and family. For most New Yorkers, and for most Americans, the story this summer is the dramatic increase in gasoline prices.

The impact of this increase is affecting people’s behavior and will almost certainly influence their votes this fall. On the behavior side, no one is buying SUVs and if you want to buy a hybrid car, you should be prepared to wait a while. The MTA reports increased use of mass transit and reductions in toll collections on their bridges and tunnels. Places like Long Beach, only 23 miles from Manhattan and a short ride away on the LIRR are seeing big increases in summer visitors as folks are hanging out closer to home. People are thinking about where they are driving and are reminded about the need to be careful to plan their trips every time they pay $55 or $60 to fill their gas tanks. This is a major change in our mobility and in our freedom-oriented lifestyles.

It may be that people will get used to these new prices and go back to their old way of moving around, but I doubt it. First, there is no assurance that the price of gasoline will stay at the current level. Second, as the economy continues to decline many people will simply be unable to afford to pay these prices.

Which leads to the political impact of high gas prices. As Bill Clinton famously observed in his 1992 campaign, "It’s the economy, stupid". Americans vote their pocketbooks first and everything else comes later. High gasoline prices are a constant reminder that the economy is in trouble. John McCain has the unfortunate luck to be a Republican in the year that his party and his sitting President are going to be blamed for the sorry state of the economy. Polling data already reflect Republican weakness this year and the political impact is getting hard-wired into the American electorate.

Politics is unpredictable and lots can happen between now and November. However, summer only comes one time a year and people are going to remember the trips they couldn’t take this July 4th. It’s also unlikely that the economy will turn around before the election. The tax rebate stimulus has come and gone, and while it had a positive impact, it was clearly too little, too late. McCain should be happy about one thing-it’s a good thing that the election is in November instead of December. The same forces that are driving up the price of gasoline will also drive up the costs of home heating fuel this winter. It’s one thing to reduce vacation travel-it’s another thing to need to wear your winter coat indoors.

America needs to get off of fossil fuels in a hurry. The economy depends on it and the next President’s re-election will require it. Let’s see if the people providing leadership in Washington D.C. are up to the challenge. The Impact of Gasoline Prices