Virginia’s Vulnerability to Oil Shocks

The Wall Street Journal ran a front-page article last week profiling the rebels who were sabotaging oil infrastructure in the Nigerian river delta. They aren’t anti-American — they’re fighting the central government. But the effect is the same. During a period when energy supplies are incredibly tight around the world, rebels in the most obscure trouble spots have the ability to push up the global price of petroleum.

What does that have to do with Virginia? Plenty. As much as the United States as a nation is vulnerable to disruptions in global oil supplies, Virginia is even more vulnerable. That fact seems irrefutable in light of information passed along by reader Larry Gross. Two data points:

  • Even by the porcine standards of the United States, Virginians are energy hogs, judging by a chart prepared by the California Energy Commission. Americans consumed 464 gallons of gasoline per capita in 2004. Virginians consumed 527 gallons — more than 13 percent more.
  • In a survey of the vulnerability of the 50 largest U.S. cities to oil price shocks, “Washington, D.C.” scored fairly well at 11th best prepared. But Virginia Beach (Hampton Roads) ranked 46th! And the good news for Washington isn’t as good as it seems. If the authors of the SustainLane study had considered Northern Virginia separately from the District of Columbia, I’m quite certain the region would have scored even worse.

The General Assembly passed an energy bill this year which sought to improve Virginia’s energy supplies. That’s fine. Increasing domestic energy supplies and diversifying our foreign sources of supply are good ideas. But that’s only part of the solution. The piece the General Assembly neglects is conservation…. which means finding ways to get Virginians to drive less.

Unfortunately, while the General Assembly seeks to stabilize energy supplies on the one hand, it seeks to compound our dependence upon imported foreign petroleum on the other. Confronted with the rising cost of asphalt, the Senate response has been: Raise taxes and spend whatever it takes. Confronted with a steady escalation in Vehicle Miles Driven, the Senate response has been: Build more roads… and while we’re at it, throw some money at mass transit, too, because it makes us look progressive, but mostly spend the money on roads.


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15 responses to “Virginia’s Vulnerability to Oil Shocks”

  1. Anton Traversa Avatar
    Anton Traversa

    Well said, Jim. The problem lies with the way this state was organized from day 1. Jefferson’s agrarian principles were all very well and merry before the idea of suburban sprawl became feasible, so now Virginia has neither the kind of urban nuclei its population should suggest nor the idyllic vision of small, rural, sporatic population clusters as Jefferson envisaged. Bad news: it makes us more addicted to driving (thus, gas) and makes mass transit less practical (though that is slowly changing. unscore slowly).

    Good news is that Virginia has the ability now, in a way that was never true before, to stay true to Jeffersonian principles without sacrificing competitiveness. How? The way the information age has nearly destroyed the old norm of doing business in the ‘big city’ to be a global contender are long over. The internet allows a company based out of Richmond (or Redmond, for that matter) to be as big or bigger players than anyone renting space in New York, Chicago, or Los Angeles.

    The question is whether we have the political leadership in the state to find effective and creative ways of making the techno-agrarian republic a reality in Virginia. Of course, the only way to make that happen is to wash away a lot of the blight that overruns good Virginia land with pretty minimal returns. I find it difficult to accept that another Wawa or Wendy’s in Henrico contributes in such a way that couldn’t be replicated in a more urban way. In a sense, it means mass consolidation. This is to revive the idea of the pedestrian community, mass transit, and thus a lesser reliance on automobiles.

    I should mention, however, that autos would be far more fun to drive between the urban villages and cities among restored landscape than the gross abstractions of wire, concrete, and neon in Midlothian.

  2. Jim Bacon Avatar
    Jim Bacon

    Anton, I like the way you think!

  3. Anonymous Avatar
    Anonymous

    While I agree with the notion that we should find a way to reduce driving distances, the statistics that you cite do not necessarily prove your case.

    It is true that we consume more gallons of gasoline per capita than the national average. We also earn more (= can afford it). And we have a mix of urban/suburban/rural settlement that is different. And we’re Southern (mostly) which assumes we like driving big honking F-250s, like Montanans, who have mandated ethanol and still consume almost 20 gallons more per year of gasoline per capita than we do.

    Any person schooled in the statistical arts would shudder at the conclusion reached from a data point that does not control for all those variables.

    Don’t confuse energy policy with transportation policy. They’re related, but not interchangable. Conservation is a good thing, a really good thing. So is driving less miles.

    But not everyone wants to ride the bus to work and a good lot of us, judging by the polls, really want to live an hour into the country and don’t mind paying for the gas if it buys us piece of mind.

  4. James Atticus Bowden Avatar
    James Atticus Bowden

    Or, we could increase the supply of energy.

  5. Jim Bacon Avatar
    Jim Bacon

    Anonymous 8:54, I agree with everything you said, including the right of people to live where they want and drive as far as they want — as long as they pay the location-variable costs associated with those decisions. Someone who lives on a farm in the boondocks and drives 40 miles to work is entitled to do so. He is not entitled to expect the Commonwealth of Virginia to subsidize that decision.

  6. Anonymous Avatar
    Anonymous

    Jim,

    What was one thought of as the boondocks is now the home to hundreds of thousands of people who commute well ove 40 miles each way – should the Commonwealth of Virginia be expected to subsidize that decision, given the fact that both the localities and the Commonwealth knew what was coming (localities approved the zoning, etc.)

    There are very few farms within 40 miles of the worst transportation problems in the Commonwealth – a few, yes, but not a lot.

  7. Jim Bacon Avatar
    Jim Bacon

    Anonymous 10:55, I supposed we could justify compounding past errors on the grounds that a large number of people made major financial decisions (where to buy a house) on the expectation that past policies would continue. But then there would never be a way of breaking the cycle. At some point, you just have to say, enough is enough, we can’t maintain the policies borne of a cheap-energy era when every indicator suggests were entering an expensive-energy era.

  8. Ray Hyde Avatar

    The picture that Anton Paints is the image I have been trying to portray. One reason farms have so much trouble is that most of them are not within 40 miles of the worst transportation problems. Those transportation problems are associated with jobs, for the most part, and jobs are required to keep most farms running.

    If we had a policy to support the techno-agrarian-medium size municipality regime those guys might not have to drive 40 miles to work in order to support our open space.

    If he is not entitled to expect the Commonwealth to subsidize his decision for a long commute he should also not expect to be required to subsidize transit either. Those people can pay their location variable costs, too.

    When I was riding VRE, my ticket was $5.50 and parking was free. But someone else was contributing $9.90 to the cost of my ride. If I missed the train, I would drive in rather than wait 30 minutes for the next train. Generally I would arrive before the train I missed. But that trip would cost me $8.00 at AAA rates, and I would pay $15.00 for parking. In addition I would pay some more money through other taxes to pay for the use of the road, and so would other Commonwealth residents. Hence my ride was “subsidised”

    Here is the difference. Whoever pays for the road pretty much has the option of using the part of it near him. And everyone benefits from the roads, even if they don’t drive at all. The road subsidy applies equally and is uniformly distributed, even if it is unequally used.

    But what about the guy that pays th $9.90 for my ride on the VRE? He may or may not have the option of using it. The argument that everyone benefits is harder to make. Suppose the train doesn’t run one day. That would inconvenience *mostly* those who travel roads that compete with the train. (Yeah, I know there are larger dibenefits in pollution) The guy who lives in Manassas and works at Dulles might never notice the difference, yet he is still paying for the train. He will notice the difference if the road is not maintained, and so will the people that use the roads that compete with the train.

    To the extent that the state and the feds are involved, it is even worse, people in Roanoake and Iowa are paying for our rides. Therefore, I see the location variable costs argument as counterproductive.

    It is true that cars don’t pay their full costs, but, even if you throw every concievable externality at them, they still pay a higher proportion of their own costs than any other form of travel subjected to the same kind of analysis. Furthermore their benefits are more widely distributed so the location variable costs are less important.

    As we enter an era of higher energy costs, a lot of adjustments will be made. But there is no reason to support policies that are not cost effective, and we should be very careful about ginning up faulty arguments to support the policies we prefer.

    Ideally, roads, trains, bikepaths and pedestrian ways would be fully used but not overcrowded. We would make some accomodation for peak load problems and accept some value of vacancy during the rest of the time as a result, and we would also accept some level of congestion as well. Ideally, each mode would pay its own location variable costs, as near as we can allocate it, without making specious arguments, and while recognizing the allocation is not perfect. However, I don’t hear anyone suggesting that the multimillion dollar costs of some bike trails be paid for with smart path user fees. Instead, we argue that they should get a bigger subsidy!

    Then, over the long term, people would make more efficient decisions on job and living arrangements, while recognizing they will never be perfect. In order to make the best use of our transportation we would like the back channel to be eqaully as busy as the forechannel. That means we would like to have equal accessibility to jobs in each direction. So we need more polycentricity, more places, but that does not address either size or density.

    In PW County they have just completed a survey on the public wishes regarding open space. The County classifies open space as active recretion areas, like ball fields, passive recreation areas like, parks, trails, etc. and conservation areas. The people indicated, not surprisingly, that they wanted more open space, and that they would like it to be more connected, and more local to their homes, and more accessible. This last requirement is going to put more pressure on conservation land.

    The conundrum is that more open space county wide will necessarily mean more density locally even if the same average density is retained. The choice appears to come down to privately maintained yards, on which people pay taxes, or publicly maintained yards for which people pay taxes.

    Now, if you are going to have more open space in the way people say they want it, you will also have more scatteration of the housing, and more disconnectedness of the groups of houses, because they will be pod-ized, if you will, by the open space boundaries. My neighorhood has a grid street pattern, yet it is still pod-ized by natural boundaries and industrial areas.

    Next you have to decide how large the built up areas will be relative to the open space areas. Citizens have stated a preference that their open space be near by, and that suggests the open spaces and the housing areas be limited to walkable (or bikeable) sizes. Or, you can dedicate a lot of your open space to parking spaces.

    The question come down to what is the optimum size for the polycentricities? Too small and not dense enough and you have sprawl. If they are Too Big and Too Dense then you can’t have as many, they are more congested, and they are farther apart, so you lose the transportation efficiency of polycentricity.

    I’m not sure there are hundreds of thousands who commute over 40 miles each way. Our average trip to work is still only 24 minutes in Virginia. I suspect there is more gradation: People in Merrifield work downtown, People in Fair Lakes work in Arlington, People in Manassas work in Fair Lakes or Vienna, People in Front Royal work in Manassas, or maybe Winchester.

    So I have neighbors that travel a long distance to work, and have for decades. What was a 30 minute trip is now two hours, and it is not because of a decision they made. Just because PW and Fairfax littered the highway with new and dense development closer in, is that their fault? Nobody guaranteed them a 30 minute commute, but nobody told them they were now going to get slammed with a new distance tax just because the roads are now congested, either. Those close-in developments that later caused the close-in congestion were planned, after all.

  9. Anon 8:54 Avatar
    Anon 8:54

    I confess I may be missing something here, but exactly how is the state subsidizing the vehicular commute of the guy who lives in the boonies? He buys more gas and pays more in gas tax. I’m not buying that theory about rural land being undertaxed. It is only undertaxed if you assume everyone who lives there has to drive a long way every day.

    I’m all for “subsidizing” mass transit. I NEVER drive from Richmond to DC anymore, I always take Amtrak, and I’d love that option to Hampton Roads and Roanoke. And I’d be willing to pay higher taxes for it.

  10. Jim Bacon Avatar
    Jim Bacon

    Anonymous 8:54, The state isn’t subsidizing the vehicular commute of the guy in the boonies…. yet. As you correctly observe, the guy in the boonies pays a gas tax to support maintenance and new construction. What will happen under the Kaine/Senate plans (and to a lesser degree in the House plan), however, is that maintenance and construction will be funded significantly by non-gas taxes that are not related, even indirectly, to the amount that the taxpayer drives. If and when those taxes are adopted, the motorist who drives 5 miles to work will be taxes on a basis equal to the motorist who drives 40 miles. That’s an implicit subsidy.

    The subsidies in our society are not for driving per se, but for real estate. The person who lives in a low-density environment in the boonies, or in many “suburban” neighborhoods, for that matter, are getting preferential treatment in rates for electricity, telephone, water and sewer. (The rates they’re charged do not fully cover of extending the utility to their location). They are getting subsidies when the state spends scarce road contruction dollars to improve road connections to their location. They are getting subsidies from local governments, which do not charge the full cost of providing police, fire, rescue and other urban public services to their remote location. I won’t even go into the preferential interest rates provided by the mortgage industry.

  11. Anon 8:54 Avatar
    Anon 8:54

    Most folks in the boonies are served by electric cooperatives. Since they charge themselves the cost of operation, there’s no state subsidy there (but cushy federal financing is another question). I agree that telephony is subsidized for rural areas not served by coops, but that is a federal mandate (Universal Service Fund). Gas companies do not extend lines to the boonies. And in the boonies as I define it, there is no public water and sewer.

    True there is a local subsidy, for police only. Most boonies are served by volunteer fire and rescue.

    So, please help me understand where the state/local subsidy exists that could be affected by changes in state/local policy? Otherwise, this is a national issue and not one that our state/local leaders can correct, true?

    Of course, my evidence is anecdotal, since I have lived almost all of my years in various Virginia boonies.

    Do you have hard evidence to support those assumptions?

  12. Jim Bacon Avatar
    Jim Bacon

    Anon 8:54, On the point you raise regarding electrical cooperatives… The subsidy does not occur at the level of power generation, it occurs at the level of power distribution. There are two factors to consider.

    (1) The more spread-out the population, the more expensive it is per household served to build and maintain distribution lines. Greater distances between dwellings translates directly into more power poles to plant into the ground and more miles of cable to string, and I would presume (though I’m no expert) more money spent on other transmission infrastructure.

    (2) Transmission lines leak electric power. The greater the distances covered, the more electric power they leak. I can’t tell you how great the leakage is, but it could well amount to several percent.

    Now, look at electric rates. Every residential customer within a service area pays according to the same rate tariff. It doesn’t matter if they live in a relatively compact urban enclave like South Boston or Farmville, or if they live on a subdivision miles from nowhere. It costs the power company, whether Dominion, AEP or your local co-op more per household to serve the remote subdivision than it does to serve the town of Farmville. That’s a subsidy.

    Much the same logic applies to all utilities. Residential rates are uniform, regardless of what it costs to serve different locations. In effect, those who reside in efficient-to-serve locations are subsidizing those who live in costly-to-serve locations.

    Now, if you live in the boonies, and you generate your own solar electricity, have your own satellite TV/broadband hook-up, pump your own water, and use a septic tank, then my critique does not apply. But if you live in the boonies and demand an urban level of services, as an increasing number of people do, then I do have a problem.

  13. Ray Hyde Avatar

    “They are getting subsidies from local governments, which do not charge the full cost of providing police, fire, rescue and other urban public services to their remote location.”

    They don’t charge the full cost of providing service to ANY residential location. It is widely reported in many jurisdictions that residential construction does not pay its own way in taxes. If we adopt the denser structure you advocate, not only will lots be smaller, residences will be smaller. And, according to your argument, if we build enough of them, the prices (and valuations) will come down.

    The big enchilada is schools, which are not particularly location sensitive.

    By saying that localities don’t charge enough for their services, it seems to me you are advocating a tax increase.

    I’ll buy your argument about electric rates, and transmitting for long distances is wasteful, but the rest of those services are either not very location sensitive, or don’t exist for practical purposes, so the rest of that arguent is overblown. Where it does make sense is in areas that were previously on septic and are now being converted to water and sewer, being annexed into towns, etc.

    However, the large lots and low density that may exist in those areas was planned. And it was planned according to the expressed wishes of the planners and public at that time. To now propose a change in billing rates based on location would be highly unfair. It is one thing to encourage new residents to make what we now feel are “better locational choices”, if we are willing to provide the incentives for them to do so, it is quite another to punish existing residents for “choices” made decades ago when the incentives were different.

    I don’t even buy the argument about roads. Around here it has been a long time since any new roads were built. For those that used to be long distance commuters (which is not everybody) their commute is now much longer (in time) because of new construction that has sprouted up much closer in.

    So now you have demands for major new construction in the Haymarket area and you suggest that those in the boonies should pay more, if they want to keep their previous commute time. At one time, Fairfax, and PW had slow growth programs, and one of the results was large lot restrictions. These had the (government sanctioned and caused) result of causing other people to move farther out, and this is a choice you now seem to think they should be punished for.

    You seem to be arguing against the proposed methof of increasing road funding because they are not related, or only marginally, to driving. Yet I didn’t hear you claiming we need a higher gas tax. If our gas tax was similar to Europe, it would be, what, $2 a gallon? With that kind of tax, those that choose to drive the most would pay the most, people would change locations to avoid driving, and we would have enough money to support transit where it really works and enough density that it might make a little sense. I haven’t heard you supporting higher fuel taxes, even though it appears they would support your other positions.

    Even if it is true, that we subsidize low density environments, there are two problems with your argument.

    The first problem is that we previously planned low density environments for a reason, and we implicitly accepted the costs at the same time. In the case of rural electrification and many of today’s agriculture department programs, we accepted those costs explicitly, because it was percieved at the time that they were “for the public good”.

    The second problem is that urban areas get even more subsidies. Transit is paid for by people who will never ride it, but roads are payed for by people who all benefit from using them. There may be some transit benefit to those who don’t use it, but the argument is tenuous. Another way urban areas get subsidized is through the enormous taxes paid by businesses. And it is THEIR poor locational choices that is causing the transportation problems we have at least as much as it is the long distance commuters.

    Not everyone is going to be able to take transit to work, ever.

    What were once manageable commutes are no longer, not just becuse people were encouraged to “choose” to live farther away, but also because more businesses have hired more people in locations where those people must be imported.

    After you look at all the subsidies and all the ways they are unfair and mismanaged, maybe it all comes out in the wash, and it is not worth fixing because the costs of all the changes is higher than the net benefits. But if you think the net benefits are worth the cost, then you should be willing to raise enough taxes to pay for them.

  14. Anon 8:54 Avatar
    Anon 8:54

    The fact remains that any subsidy for rural electrification or telephony is a federal, not state, issue.

  15. Jim Bacon Avatar
    Jim Bacon

    Ray, you said, “I didn’t hear you claiming we need a higher gas tax.”

    You haven’t been paying very careful attention! If taxes must be raised, I’ve argued that the gas tax is the best, at least until we can figure out how to charge people on the basis of Vehicle Miles Driven.

    Everyone agrees that maintenance costs are going through the roof, and it won’t be long before the gas tax doesn’t even cover ongoing maintenance expenditures. I’d have no problem whatsoever hiking the gas tax, as needed, to pay the escalating maintenance costs. (Funding new construction is a different issue. That’s the proper role of congestion tolls.)

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