Gasoline at Less than $2 per Gallon?

The price of gasoline, which hovered above $3 per gallon not long ago, has dipped beneath $2 a gallon at an Exxon gas station in Gainesville, the Washington Post has reported. The relief from high prices is certainly welcome. But no one should be deceived that the era of cheap gasoline is returning for any length of time.

One of the reasons that gas prices soared so high is that uncertainty over petroleum supplies prompted businesses up and down the global supply chain to hold higher inventories. As fears of supply disruptions subsided, businesses have lowered their inventories, creating a temporary glut on the market. By all means, let’s enjoy the respite while it lasts. And let us hope that it takes a year or two before prices return to $3 per barrel.

But the fundamentals remain intact: Global petroleum consumption, led by China, India and the United States, continues to climb. Global petroleum supplies have peaked. Old, cheap oil is being depleted, and it’s being replaced by new, expensive oil. The recent discovery of a new oil basin in the Gulf of Mexico won’t change anything. The oil find will take years to exploit and, because the oil resides in very deep water, it also will be very expensive to extract.

Virginia still needs to prepare for an expensive-energy future. That means embracing new forms of energy, and it means conservation. To be meaningful, conservation must entail more than installing energy-efficient light bulbs. We need to evolve towards a more energy-efficient transportation system and human settlement patterns.

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17 responses to “Gasoline at Less than $2 per Gallon?”

  1. James Atticus Bowden Avatar
    James Atticus Bowden

    Jim: Energy efficient transportation and better settlement plans would reduce energy demand by what per cent?

    I agree with lowering demand. And, you really need to keep working on increasing supply of today’s energy and tommorrow’s alternatives.

    Working both curves, supply and demand, will move costs down and increase wealth for the citizens.

  2. Anonymous Avatar

    Don’t you find it ironic that the price of gas has dropped and there are national elections in 50 days?

    Hmmmm, go figure.

  3. Stephen Braunlich Avatar
    Stephen Braunlich

    It’s true: I paid $1.97 at the Gainesville Wawa yesterday (Exxon was at $1.99, and they don’t even have the pizza pretzel.)

  4. E M Risse Avatar


    Fundamental change in settlement patterns would reduce energy consumption by a factor of 10 plus or minus a point or two depending on climate.

    We have made this point over and over in our columns and will add some new data in an upcoming column.

    We are working on a post on the good news from the Gulf to be posted soon.


  5. Anonymous Avatar

    Ditto on the election, just a little too convenient there. But it dropped like this last fall and winter (after the Katrina spike.) I remember paying just above $2 in January or February. Historically, adjusted for inflation, we really only flirted with a tie with the prices when it spiked about 1981. It’s cheap, dirt cheap, and people will behave accordingly. Goodbye Honda, Hello Ford Explorer and the House in the Sticks.

  6. Anonymous Avatar

    Mr. Bacon,

    As a long-time reader of your blog, I have wondered when you are going to set the example for a more “energy efficient human settlement pattern,” leave the comforts of Henrico’s west end and move into the city of Richmond?

    Making an assumption here, but there are probably benefits to your current location that makes it more attractive for your family, such as having a yard to enjoy in some privacy and significantly less crime to fear.

    Who will be the arbiter of this new utopia you seek? Who will be the one to tell families that they can no longer choose a rural or suburban lifestyle – that they must now live somewhere that looks like the Fan, with its subsequent crime, noise, and pollution challenges?

    And why don’t those who so earnestly seek these new human settlement patterns, like you Mr. Bacon, avail yourselves of the presently available options to live in such an environment?

  7. Jim Bacon Avatar

    Anonymous 4:04. I love city life, and I lived in the city of Richmond for 16 years. My wife likes the ‘burbs better. She won.

    I’m not a social engineer, as you imply. I believe that people should be free to live where they want, in any kind of community they want, as long as they pay the location-variable costs (roads, utilities, public services) associated with their decision. In other words, don’t move to a farmette in the boonies, demand an urban level of services and expect to pay the same taxes/fees as someone who lives in a location that’s more efficient to provide with infrastructure and services.

  8. I’ve got news for you. Those that live in the boonies, don’t get any services, whether it is a farmette or a real farm.

    As it stands, the real farms are paying 300% in taxes of what they owe in services.

    When I start hearing you demand true equity and not some faux equity, then I’ll start listening. As it stands, your argument flies in the face of facts, as presented by the government and by conservation interests.

    On top of that, I’ve had the last couple of weeks off for my annual “farm vacation”. During the past two weeks, while I was working at home and not commuting, my fuel costs have gone up 500%, and the income I earned from the money has gone down 500%.

    So much for living and working at home.

  9. Larry Gross Avatar
    Larry Gross

    re: “In other words, don’t move to a farmette in the boonies, demand an urban level of services and expect to pay the same taxes/fees as someone who lives in a location that’s more efficient to provide with infrastructure and services.
    “I’ve got news for you. Those that live in the boonies, don’t get any services, whether it is a farmette or a real farm.”

    sometimes it seems we’re in the same room but dont’ see the same things…

    In my county – which in two decades has grown from 20K to 115K population – as the influx was occuring, the “new” folks were agast at the lack of services AND demanded upgrades AND were willing to pay increased taxes to get them.

    That was fine and dandy for the guys who were commuting to high-dollar NoVa jobs but it did not sit too well with the local folks who earned 1/2 the salary and were – as they say – “land rich” and “money poor”.

    In the end, it did not matter what they thought because 15K people are a hell of lot less than 100K people and they prevailed.

    Now we walk, talk and quack like NoVa. We’ve got their 911, their fire/rescue AND their CONGESTION and.. ironically a quality of life that is lower than it used to me.

    This is the number one complaint at hearings now for rezonings… the NoVa transplants show up and say “I came here because this was such a wonderful rural place – and now it’s geting ruined”.

    And Ray .. it is THESE folks that want restrictions on land – not the folks who have lived here for all of their lives. Those folks will tell you that their land was supposed to be their 401Ks.

    Folks who have lived rural all of their lives.. made choices also with respect to high salaries, commuting, etc, etc. They chose not to and to live a more modest life without all the amenities.

    I don’t begrudge people needing a place to live. In Fact, I welcome them but it is amusing sometimes to hear their self-centered complaints.

    It really does seem at times that it’s all about them… so when I hear them complaining about the awful congestion on their 100 mile commutes in SUVs that they choose to drive SOLO… and their demands that “something must be done”… I strongly suspect that in their minds – the “something” is not them nor their lifestyle choices and consequences. They want more roads and they want someone else to pay for them.

  10. You are absolutely correct, Larry. It is the newbies who don’t want any mre development: after all it was the oldbies that allowed it to start. But if the newbies succedd in preventing development it is the remaining oldbies who will pay the price. Again.

    I don’t have any problem with charging more of the cost of driving to those who drive.

    I hear the same comlpaints here: “I moved here ten years ago and ……” I never saw a deed that says they have the right to tell me what to do. On the other hand, if they want more services and are willing to pay for them, then what does that say about the no more taxes position?

    I just love the people who move out here and first thing they do issurround their hous with security lights. The people who are surprised to learn that their neighbors own guns, and use them. the people who freak out when they come flying hell bent around a blind curve and discover that 75% of the road is bein used bay a 14ft wide slow moving haybine. Etc. Etc.

    Some communities have a rural living compact. When you buy a property in a rural area you must sign and agree to the compact which spells out allthe disadvantages that newcomers might not like, like odors, night farm operations, dust, chemicals, noise, farm equipment, strayed livestock ands so on. Sounds like agood idea to me.

    Certainly the oldbies need some protection, but preventing them from more development won’t help them. That’s why I say that only income and sales should be taxed: when an oldbie sell a lot, then it is a sale and income and can be taxed. Otherwise, put a limit on the amount that taxes can be increased each year in order to spread out the pain. In Maryland the cap is 5% increase per year, so if taxes go up 100% it will take existing owners 20 years to fell all the pain, and this shifts more of the cost to newcomers. Even better, allow reassessments only when the property is sold.

    But it is not only the newbies that want restrictions. We have a couple of old line families with official positions here who can only be described as anti growth nazis.

    One is a neighbor who came to me with a petition to sign to prevent another neighbor from splitting a hundred acres into four 25 acre lots, which was a by-right situation. I asked why, if she didn’t want the property subdivided she didn’t just buy it and not subdivide it. “Oh, I couldn’t afford that.” Well, I said, what makes you think the person who owns it can afford that?

    Turns out, the owner was a woman who had worked for her as a domestic, for many years, and selling off the property was her retirement plan. Some people just don’t care who they hurt.

    Then there was the other neighbor who lives on what was once-apon-a-time part of the farm, who told me she would hate to see it subdivided, which isn’t going to happen anyway. (she likes to ride her horse over here.) I pointed out to her that if the current laws existed back when her lot was created, then neither one of us would be here today to have this conversation.

    Yep, you are right, so the question is, what can we do that is fair to all? I’d say charge more for travel, defer real estate tax increases for existing residents to the extent possible, make more jobs available locally. Set a time phased schedule for use of building rights – never is not a realistic option. Set up a system where those that want conservation pay for it.

    What else can we do?

  11. How’s this for a rural “service”?

    I just got my annual land use declaration form, and to file it I must pay a fee of $250 so that the county can record the value of my operations here.

    The farm has done pretty much the same things for the last fifty years. How many times do I have to pay them to tellthem the same old thing? They already damn well know that I’m not ALLOWED to do much af anything else.

    That $250 dollars is on top of the 300% excess I pay in real estate tax. It is a total rip-off, no wonder they want to keep me around. If this is supposed to be a recordation fee, I’d sure like to know how much that clerk is getting paid.

    Shucks, I’ll put up a website where people can log on and record their land use, and give it to them for free. What do you suppose the chances are that they would accept?

  12. A factor of ten? We can get by on tenpercent of the energy we use now?

    Not a chance.

    Almost 25% of energy use is residential, and almost half of that is to run the kitchen, laundry and water heating.

    So, almost ten % of our energy is used just to feed and bathe ourselves. If you eliminated ALL transport, all commercial use and all industrial use you would reduce enegy use by a factor of ten.

    I’m sorry that statement is just not credible.

  13. Larry Gross Avatar
    Larry Gross

    re: transplants, original residents, growth…

    yes.. local folk also can be opposed but experience in Spotsy is that many sooner or later adopt the attitude “if you can’t win.. join them”…

    Which is if you can’t keep the 100 acres next to your farm from being cleared and having 400 homes AND your own taxes are double/tripling/etc… give it up … get your money.. and find cheaper digs.

    Ray – is your land NOT designated in a land-use status?

    I pay more taxes on a vacant 5 acre lot than a developer down the road pays on 200 acres of undeveloped land that he has in “land-use”.

    Do you not have such an option?

  14. You are right, you are truly getting screwed on your five acres, and part of it may be because of land use. I have an article from a tax journal, written by a professor in California who studied Faquier land use taxation. He concluded that most residents, including many farmers pay MORE tax than they would absent land use taxation.

    Yes, my land is in land use, but that isn’t the point. First, I pay the same tax as anybody else on my home and two acres. The remainder is taxed at land use rates, but even the county admits that this is completely free money to them, because they provide NO services in return. AS a result, they claim (their figures, not mine) that farms pay 3x in taxes what they get in services.

    In addition, I pay $250 a year just to be enrolled in land use, and then of course I have to use the land or find someone tha will. Net result is that the Farm drops around $25,000 a year on the local economy, in addition to our living expenses. That money comes from me busting hump nights and weekends.

    If I ever come out of land use, then the county will want back taxes for five years back, and they want to change that to ten years back. So land use tax is a deferment, not a permanet condition. In other words, the county will charge me retroactively for ten years of residential or commercial use that I never actually had.

    Bottom line is that land use is not a good deal for you or for me. It is really a screw job for farms with lots of infrastructure, like fancy horse barns or dairies, or on site processing like wineries, because all that stuff gets charged at regular rates. Which is why I grow hay: it is the least cost highest profit, lowest taxes.

    Meanwhile, my taxes are doubling and tripling just like everybody else’s. So what happens if I try to give this place up and go find cheaper digs. Well, because of the land restrictions, cheaper digs elsewhere are non existent.

    And because this land has no value for development only someone very wealthy can afford to buy and keep it. But that market is kind of thin, and the buyers are sophisticated. So maybe it sells for $2.5 million (its not a fancy estate with a marvelous home etc.) Then the government gets 40%, so I get out with $1.5 million to go spend on a new home in some pedestrian friendly, vibrant, transit oriented neighborhood, which is probably where my buyer came from.

    You are totally getting screwed on your five acre lot. I’ll bet the assessment didn’t go down when the building right was removed. You are being charges as if it is a buildable lot, when it isn’t, and you are being charged more, because of all the land that is in land use (depending on whether you believe the author in the tax journal or the agenda driven and unproven statements from your local government).

    Your land is being held in reserve for the conveneince of the government, at your expense. You should have the same land use rate for your five acres as I have, because it is being artifically held off the market for the same reasons. But one day, the time may come, when you would really like to develop that lot, because the profit from doing so becomes many times greater than the land use “savings”, which really ar not savings at all, but a screw job.

    Or you may just want to do it for family reasons. Either way, you will soon discover that land use is no bargain if you can’t use the land.

    And paradoxically, one of the drivers encouraging you to develop the lot will be the high prices caused by the fact that people like your neighbor cannot develop.

    I agree with you that when someone has ten building rights and asks for 200 then ther will be expenses that need to be paid. But when someone has ten building rights and they are reduced then he needs compensation, too. When he has ten building rights and other restrictions are imposed such that he realistically cannot use them, then what good are the “rights”.

    Finally, suppose the county came and paid you for your building right. Now they own valuable property. Usually under county rules surplus property has to be auctioned off. But county owned development rights are usually given away aor “allowed to expire”.

    If your home is a large part of your net worth, you could double it by developing that lot, so the opportunity cost of what happened to you is huge. For me it is even worse. Sure, I can sell out and have a bunch of bucks, but I will hav lost the entire family homestead and the only home my wife has ever known. Meanwhile, the loss of my prvious development rights could easily mean a difference of ten X over what I can get by selling it as is.

    So, when the county says, look we are saving the taxpayers $2300 bucks for every home we don’t build, I point out that they are also costing one taxpayer far more than they are saving the others.

    I don’t want the windfall selling this place could result in, but I don’t want others to have a windfall at my expense either, which is exactly what the county claims is happening: “We’ve got to save these farms because they keep your taxes low.” (Unless of course you are the farmer).

    But, the tax journal and other professors claim this is just not true.

    So, if the county is right, then the system is inequitable and should be changed. But if the professors are right, then land use has little to do with rising taxes, the brouaha over growth and development is misguided or wrong, and you and I are getting screwed over for nothing other than higher home values for others.

    Pick one, I don’t care which, but what we have now is a screw job for everybody.

    By the way, that guy next to you probably doesn’t have 400 building rights, but the land might have had 20 or 30 at one time. If he want’s 400 building rights he should be able to buy them. You’ve got (had) one you might sell and I’ve got (had) a bunch I might sell.

    Except for ont thing. They have already been stolen.

  15. Larry Gross Avatar
    Larry Gross

    I’m speechless.

    I know the laws and policies are convoluted and complex… and one has to wonder if it is such a rats do developers every go forward either?

    Any landlowner can make any proposal to his local elected boards with respect to developing his/her land and they have to listen and they have to act on it, have a hearing and respond within a certain amount of time.

    If they like your proposal – you actually GAIN development rights.

    If local jurisdictions were really taking “rights” from people.. wouldn’t there be virtually no development rather than the massive building boom that has occurred over the past two or three decades?

    In my county – the elected board actually prefers developers to landowners in property development because the developers are ready, able, willing and prepared to jump through the various hoops, pay proffers, and, in general, produce a project that meets the ordinances and regs.

    Individual landowners are often under-capitialized and trying to do things on the cheap… looking for waivers… and .. in general just not financially able to do as good a job.

    Isn’t Land-Use – deferred taxes on the VALUE of the land.

    Isn’t there some serious tax-relief slack that allows one to continue to own and operate a farm as long as one agrees not to exercise their property rights?

    If you never intend to do anything with the land … other than farm it.. then it’s someone else’s problem who gets it after you check-out.

    If.. you do intend to convert it to money – then .. just like the developers – rather than rail and rant about the regs.. exploit the same opportunities that developers do…

    I don’t know that ranting about what is not right… is as effective – as exploiting the opportunities but then I’m envious of your obvious wealth compared to my own lack of.


  16. If you think I’m rich, you should see my checking account, or spend one Saturday with me trying to get something accomplished with 30 and 40 year old equipment. I have dreams of the time when I can spend more time on top of the tractor than I do underneath it. Of having a decent shop where I can work without freezing.

    My wife and I are a classic case of land poor. We pay more than $11,000 a year in real estate taxes, so when someone complains to me that his taxes have doubled, I can feel his pain in earnest.

    Theoretically, the idea of land use is to tax you on something more or less related to what you can earn form the land, hence the term land use. There is an organization (an unelected government agency) that figures this out. Supposedly, I can make something like $400 per acre off my land, and that is what I am taxed at.

    In fact, because I’m a part time farmer, I make less than half of that. If I rented the land to a real farmer, I’d make a tenth of that.

    Now, I like the idea of being taxed on what your property earns, because now your real estate tax is an income tax, which I think is the right way to go. But, what is happening is that I get taxed on imputed income, not real income. Just as you get taxed on the imputed value of your home, even if you haven’t earned more money with which to pay the taax. If I got taxed on real farm income, the tax would be zero.

    Part of the reason is that half the farm is forest, so that income might actually happen some day, provided they don’t pass yet another regulation to prevent that, too.

    You are right about the developers. The authorities do prefer developers because they can squeeze them. Developers are professionals at what they do.

    But here is the problem. Once you go that route, a whole new set of additional rules kicks in. Now you must have environmental surveys, drainage plans, traffic studies, soil surveys every four hundred fett, tree census, public hearings, etc. etc. God help you if the archeologists get involved. These are so expensive that suddenly you are in an all or nothing situation: you have to apply for the max and build everything you can, all at once, in order to cover the costs.

    That’s why you have a farm one day, and a huge, ugly, barren development the next.

    I actually went so far as to investigate this, and the surveyor quoted me $100,000 with half a dozen items listed as TBD. He had no way of estimating what they would cost. In other words, write me a blank check so I can comply with the rules. Maybe you will get something, probably not. Then youstill have to come up with the proffers, and negotiate down from there.

    That is not a game I can play. I’m not a professional and those guys are, plus they have lawyers, financing, PR etc.

    So, one way or another, I’m faced with an all or nothing scenario. Sell out to someone even wealthier than I am, or sell out to a developer and let him take the risk.

    My county supervisor told me to my face that “his plans” for my property were to see someone wealthy buy it, so they could place it under conservation easement. I figure my chances of pleading to the board for relief and getting it are nil.

    So, either way, my wife loses her home, all of it. Jim Bacon explained that he lives where he does because of his wife’s wishes. I think that is something we can all understand.

    No, there is no serious tax relief slack for farmers. You either farm it, or they tax you as if you were the development that they won’t let you have anyway. Since every farm in the county loses money, statistically speaking, and the losses go straight to the local economy, the requirement that you farm is a tax in itself.

    What is even worse is, that if you just give up a conservation easement and concede that nothing will ever happen to the land, that the rights you once had are gone forever, no matter who gets elected: then you don’t have to farm it anymore: you get land use for free.

    You are right, if I do nothing then it is someone else’s problem/blessing some day. So, tThe current plan is to do all the unobtrusive and non taxable improvements first. Then when sale time comes, put up the pretty (and expensive) white fences, the twelve stall center aisle horse barn, the grazing paddocks with underground water, swimming pool, fish pond, another wing on the house etc. Then sell it as a grand estate and get out before the loans come due.

    That might get me ten or twenty percent of what it would get as much more modest homes that real people could afford and enjoy.

    What I would really like is just one relatively modest home on part of the farm I can’t farm anyway. The rent from that would be more than twice my losses on the rest of the farm, and allow me to keep it going with much less pain and aggravation. I might even get a new tractor, with AC.

    I suspect, but don’t know that your neighbor with 100 acres might be in the same boat. If he had his 20 or thirty development rights intact, and if he could count on them not disappearing, then he might be content to use one, and let his children inherit the rest.

    Maybe not. But with the rights disappearing left and right, it is no wonder we have abuilding boom: look at what is happening in Western Loudoun. I know for a fact, that this farm would be twice the size it is today except for what happened here in 1986. When my wifes widowed mom saw waht the county was going to do to her, she bailed. And because everyone else was doing the same thing, prices were depressed, and she needed to sell more than she wanted to.

    I’m not going to get the $18,000 in rent that litle house would easily bring. In the meantime, I’m working on my third fall season of stripping the paint off this place, inch by inch, down to bare wood so I can be sure there is no lead hazard when I sell.

    I’m building 44 custom made storm windows, from scratch, because I can’t afford to buy them, and if I could they wouldn’t match the house, unless you go to an archtectureal firm and have them custom made, which is definitely out of the question.

    Then there is the 1836 log barn which will collapse soon if I don’t get at it. It has been painted by generations of artists. I’ve got photgraphs of it that date to 1905 and it was old then.

    Whenever I get tired and down in the dumps I go down and look at that thing. Hand hewn chestnut beams, 12 inches square and forty feet long. How did they get them up there? I once took and adze and tried to do that. someone had more strngth and patience and skill than I have.

    Looking at that thing, pretty soon I don’t feel so tired.

    I’m going to hate it if that barn falls down on my watch, but if it does, I’ll make good money by re-sawing that antique chestnut.

    Apparently my board of supervisors would rather lose that barn than lose one acre of ground that would raise enough money to restore it. The rules are so screwed up, that I cannot even do a boundary adjustment with my neighbor who would continue to use it as pasture, because such a move might have grievous consequences for the rest of the land.

    Of course you don’t know for sure, because no one at the county will tell you, and if they do, you can’t believe them. They tell you on page one of their website, if you want to do business with them, bring a lawyer.

    I’m sorry if this sounds like ranting, but I really don’t think most people understand what is happening. Let’s call it education set in the first person only because that is what I know best.

    One Sunday I walked to get the paper, and found a nice young couple running their dog in the front field and having a picnic. I said hello and started a conversation about the dog etc.

    After a while they asked who I was and what brought me here this morning. Well, I live here, I own this place. (You can’t see the house from where we were.) Mouths like little round cheerios, they said, “You mean someone owns all this land?”

    Yeah, people really don’t get it. And I have heard very similar stories from other people, so it isn’t uncommon.

    “Oh, were sorry, we didn’t know.”

    Being Sunday, the devil must have got in me. “No, its all right, really, the dog isn’t hurting anything, just take your trash with you when your are ready. Enjoy yourself”

    “But, you might be interested to know that I just sprayed this field with herbicide yesterday.”

    People don’t get it. They don’t understand.

    I’m really sorry for what happened to you and your might be lot. You are right, the supervisors take a bunch of rights away that they don’t pay for, and then sell twice as many of them to developers that offer proffers. And the result is what you see that we all hate.

    Take what happened to yo and your lot and multiply it by 20 or 30 and you begin to understand what happened to my wife , who literally has nothing else to her name.

    Her family was not sophisticated or wealthy enough to make the proper moves to protect her, plus they had some bad luck due to her father’s stroke when she was twelve. The state took sixty acres for route 66, and then took the family’s beach home to put up a boardwalk and amusement park.

    Now the county official tells me I can only sell to wealthy people, and only if I sell it all, or at least way more than I care to.

    Yet people think WE are making a windfall or destroying their lifestyle if we sell or rent a house that we build from scratch with materials that grow here.

    Don’t by any means get me wrong. I am lucky beyond belief. I live in the lap of luxury, if you don’t look too close. (No AC, antique equipment, ancient trucks, old furniture, farm work for recreation.) Less than two percent of the population lives the way I do. At the same time many of them couldn’t stand a month of what I do. You have to love it, or the challenge it represents, and you better have a lot of skills. Money helps a lot, too.

    Converting the land to money or not isn’t the issue here, but county sand popular dogma makes it the issue. The issue is being allowed to do what makes sense for my wife and I as long as we can enjoy it. After that its someone else’s problem. Maybe a developer, maybe a conservationist. Depends on who brings the most money to the table.

    I do have one back up plan: give the place to Habitat for Humanity in respect of a life interest, and let the place come off the tax rolls ntil Habitat is allowed to develop it. The county doesn’t seem to realize that there are charities besides Virginia Open Land Foundation.

  17. Anonymous Avatar

    Did you look in charlottesville,
    I plan on that by next year
    charlottesville virginia real estate
    will be way up..

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