The global oil market is incredibly volatile. Unpredictable events like political unrest and natural disasters can spike the price of a barrel, translating into higher gasoline prices. Moreover, the long term price trend in the oil market is very clear – prices have risen for decades, and they will continue to. This has a significant impact on both business and households, driving up transportation costs as well as the cost of anything that relies on petroleum during either production or delivery to market.

Unfortunately, there’s little we can do about the price of oil. The global oil market is not easily affected by any of the domestic policy options that are available to U.S. lawmakers and administration officials. Short of direct gasoline subsidies, the government cannot change the price that people pay for oil or gasoline.

As my colleague Deron Lovaas explains on NRDC’s Switchboard blog, evidence for this can be found in the difference between the U.S. and Canada. Canadians, despite living in a country with much larger proven oil reserves than the U.S. and that is a net exporter of oil, have experienced similar pre-tax fuel prices as we have in the U.S.

“Canada, with its vast resources and small population, can’t drill its way out of price runups because they’re shackled to a global oil marketplace. And we are too.”

While we can’t alter how much we pay for gas, we can change how frequently we pay for it. We have the technology to reduce the amount of gas that families and businesses must buy, shielding us from price spikes and persistently high prices. Increasing vehicle efficiency, accelerating electrification of the auto fleet, and investing in public transportation and other transportation efficiency measures are all steps that may not do much to lower the price of gas, but they sure will let us buy less of it. We’re just not taking advantage of them.

Unfortunately, the facts on the ground have not affected the conversation in Washington. Rather, they’ve focused the attention of many lawmakers on false solutions like more oil drilling that will nothing to affect oil or gasoline prices. Until we embrace the notion that reducing oil demand is the only effective strategy to deal with fuel prices that are certain to continue rising, as a country we’ll continue to suffer through every oil price spike at the expense of our economy.

On the other hand, if we embrace the solutions that are at our fingertips – including a 21st Century transportation bill that focuses resources on projects and strategies to reduce oil use, we’ll not only avoid the pain of future price spikes, we’ll make ourselves more competitive a global marketplace in which the ability to move, people, goods and services quickly, cheaply, and with minimal fuel use is a real competitive advantage.

Global crude oil prices have been a roller coaster for the past five years. First the amazing rise to more than $140 a barrel, then back down to $40, and now back up above $100 again. We need to tackle our 19-million-barrel-a-day habit, the lion's share of which is driven by transportation as others have written. That means investment criteria that include fuel savings when judging plans, programs and projects. Consumers deserve more vehicle and mobility choices.

What will this mean, in shorthand? It will mean that we pivot from drilling for more fossil fuels-- we have that front covered, since the U.S. already has more than a half-milion wells producing oil, more than all other nations combined -- to "drilling" that saves oil. A decade ago, the Union of Concerned Scientists made this argument for vehicles with a report called Drilling in Detroit, which pointed out that there's a lot of oil to be saved by raising the bar on average fuel economy for the auto fleet. Now, thanks to the 2007 Energy Independence and Security Act and the Obama Administration the fuel-economy performance is sure to improve until 2016, and new rules are being written right now to build on those gains out to 2025. Such new standards could save as much as 2.8 million barrels oil a day by 2025.

Now we need to look at the places where most oil is consumed -- our metro regions -- and drill there. We need to drill on Main Street via investment in new rail, bus rapid transit, jitneys, shuttles, vanpools, carsharing, telework, a whole array of fuel-saving options for consumers. The options should fit the context. Rail doesn't work everywhere, neither does bus rapid transit, for example. But the hierarchy can be developed and deployed in the coming years and decades. The nice thing about such mobiity choices is that -- unlike average fuel-efficiency -- they not only save oil economywide, they offer flexibility. So if prices spike rapidly, we can react more nimbly by shifting modes (including virtual modes like broadband) to make our daily rounds. We can save in oil in a hurry, if necessary.

It is wishful thinking we can drill our way out by developing even more fossil fuels, and those who facilely say otherwise need to bone up on hard facts. Just look north to Canada to see why "drill now, drill more, pay less" is hogwash.

All of this leaves open the question of financing the needed investments, I realize. The unfortunate reality is that we should have raised the gas tax years ago, and invested the proceeds in developing a smarter, more flexible transportation infrastructure. Instead we have funnelled trillions of dollars to oil-exporters, and remain vulnerable to price fluctuations.

Now that we have painted ourselves into a corner what will be needed, more than anything, is courage as Patrick Jones rightly says. An entrenched program needs to be overhauled, for starters, to simplify and slash waste in it, and make sure it is "performance-driven" as the Bipartisan Policy Center rightly advocates. Innovative financing concepts have to be deployed, e.g., a national infrastructure bank and public-private partnerships, that leverage limited public dollars. And new revenues also have to be developed, e.g., road and congestion pricing, the gas tax, and probably - someday - a VMT fee. But as David Heymsfeld rightly notes this last step will be especially hard to take.

The bottom line is that addressing both threats posed by oil dependence and decaying transportation infrastructure will require extraordinary, serious and sustained public and private leadership.

The likelihood that gasoline prices will reach $4,50 a gallon or higher during the summer driving season should remind us of the necessity of getting America's transportation system off its almost total dependence on petroleum. Transportation is the only major sector of the American economy to have such dependence. America does not have an "oil addiction" -- American transportation has this addiction. About 70 percent of America's liquid petroleum usage is attributable to transportation. This is an unacceptable national security risk and, as we are now seeing, an unacceptable risk to the stability and recovery of the American economy.

Even though the nation's oil supply is not now threatened, as the United States does not import much oil from Libya, Americans cannot escape the effect of shocks to oil supply anywhere in the world. Oil is an internationally-traded commodity, and threats to supply anywhere in the international system will drive up prices everywhere, as we are now experiencing in this country. While there will continue to be peaks and valleys in gasoline prices, the overall trends are clear and must be altered.

It is for this reason that the Bipartisan Policy Center's National Transportation Policy Project (NTPP) has consistently recommended that reducing the dependence of the surface transportation system on petroleum must become an essential purpose and goal of national transportation policy. It is not enough to treat oil dependence as a "side-effect" that must be mitigated: there must be a positive goal of reducing oil use. This can come through much higher fuel efficiency standards for vehicles, as well as investment in the distributive infrastructure that will enable a shift away from this total oil dependence to the use of alternative fuels and/or a faster pace of technological innovation in engines that will continue, to some degree, use petroleum products.

Hopefully, this crisis in world supply and pricing will induce policymakers to think about national transportation policy in these broader terms.

The timing of the current price spike — a likely precursor to many more such episodes — presents Congressional authorizers with an extremely thorny conundrum. On the policy side of the ledger, it argues powerfully for an aggressive program to provide more transportation options for Americans eager to escape the gas-price trap. On the revenue side, it makes it less likely that the gas tax will be the source of the additional funds we need to maintain existing infrastructure and build what we need.

Combined with renewed demands for more fuel-efficient vehicles, it almost certainly will hasten the day when the gas tax ceases to be the sole source of most transportation funds. The VMT tax is almost certainly part of the answer, but it is hardly a panacea.

In our view, the American people will agree to pay more – whatever the source – only when they see that the transportation program is part of a larger plan to make their lives more secure, convenient and affordable.

To get there, the new bill must focus on increasing accountability for results, and one of the key results must be reducing our vulnerability on the energy front. Fully 70 percent of the oil we consume is for transportation, and we need a plan to bring that figure down. Congress ought to build the authorization around a set of national objectives – such as reduced commute times and lower fossil-fuel dependence – to inform project selection at the state and local level. Decision-makers on the ground should have flexibility in their approach so long as they meet the intended targets.

We must invest in a broader array of transportation options so prices at the pump don’t leave Americans stranded and broke. The Obama administration’s proposal to boost transit funding, coupled with reforms to allocate funds more strategically and through merit, would help correct this imbalance.

It is imperative that Congress and the administration engage in an honest dialogue about how to pay for these investments. Putting them off for another day – with Americans in need of options, oil dependence persisting and interest rates on borrowing at still-record lows – is unacceptable. It’s time for a bill that increases options, lowers oil usage and has a revenue source that works, so Americans have an escape route from escalating gas prices.

Reflecting on the ramifications of a gas price increase and our seeming hand wringing about it reminds me of former Pennsylvania Governor Ed Rendell’s famous statement last December that “we've become a nation of wusses” in response to the NFL’s postponement of a playoff game because of snow.

Let’s face it. The cost of gas has been volatile since the Arab oil embargo of 1973-74. It goes up; it goes down. And every time it moves swiftly in the northerly direction, we complain about it…like a nation of wusses. Do we hear Europeans complain about their $8 a gallon gas?

Regardless of your thoughts on the wuss factor, we should take to heart Governor Rendell’s advice on the importance of investing in infrastructure. In a speech to IBTTA’s Legislative Conference earlier this month, Rendell said, “A lot of people think it’s okay to stop investing because we’re in a recession. That’s wrong. If we stop investing in infrastructure, even in a recession, then our nation is cooked. We can’t grow our economy, we can’t grow jobs, and we can’t grow our country if we don’t invest in infrastructure. “

The governor continued, “You will never convince the Congress directly that they should either increase gas taxes or allow tolling on the interstates. Therefore, you have to convince the hometown. When the folks from home reassure their members of Congress that they won’t be thrown out of office because they supported commonsense things like expanded use of tolling to improve infrastructure and create jobs, that’s when things will change.”

Rendell concluded by saying, “We need a public education campaign to help people understand that infrastructure is one of the sexiest words around. When you invest in infrastructure, you grow the economy and create jobs. It’s as simple as that.”

Multimodalism can move U.S. to greater economic strength and competitiveness

As gas prices rise for a second time in three years, we must find a way to minimize the impacts of pump prices on our economy and regain control of our mobility.

But how? The answer lies in multimodalism. Multimodalism is a system of transportation diversity that offers Americans choice. Without it, we are at greater risk of having our economy and our mobility dictated by others.

Multimodalism requires us to look at transportation as one, integrated system versus independent sectors. For the past 60 years, we have viewed transportation creation and funding independently by sector – highway, aviation, mass transit, rail. It’s time to find a new combined approach.

Creating a plan that integrates all modes of transportation begins with the next transportation authorization bill, which is under way in Congress. Now is the time to influence that legislation and create a long-term funding solution for a national multimodal transportation system. We need a transportation system designed and built for our economy, way of living and other needs — now and well into the future. It must integrate multiple modes of moving people and goods — air, public transit, high-speed rail and good roads. To get there, we have to face the reality that current levels and forms of transportation funding are inadequate. To read more: http://www.hntb.com/sites/default/files/issues/MakeTransPriority_PYarossi_2011.pdf

Pat Natale, I think you’re on to something here. The sentence that most resonates with me from your posting is this: “We face daunting challenges.” This is as simple, bold and true as it gets. The problem is that we as a country are not doing enough to adequately address the daunting challenges.

In some future time – 10, 20, 50 years from now, perhaps longer, perhaps shorter – we will run out of oil. Or it will become so expensive to acquire and use that, for all practical purposes, we will be out of oil. What then? How do we grow our crops? How do we get food from farm to market? How do we get from our homes to our places of work? How do we support manufacturing? In short, how do we do anything that requires energy without access to relatively cheap oil like we have today?

The answer is, we must rapidly develop and exploit alternative sources of energy (solar, wind, hydroelectric, nuclear, etc.). In addition, we must adjust our lives so that we use a lot less energy per person and unit of output than we do today. We’ll need to modify our behavior and living patterns in favor of more dense development so we don’t need to travel as far to do the things we do. That means more fuel efficient vehicles of all kinds – cars, buses, trucks, trains, boats, planes, etc. And it means a lot more transit, biking, walking and working from home. Simple. And very hard.

The daunting challenge is that very few people are thinking about these things in an intentional and comprehensive way. Where are the 100 people who get up every morning and sit together in a room planning for the day when we have NO MORE OIL? How much funding does this Group of 100 receive to do their work? Where do they meet? What research and development resources do they have at their disposal? What does their 50-year plan look like? Which associations, universities, non-governmental organizations, think tanks, foundations, and governments are contributing to the success of this Group of 100? If the Group of 100 exists, it does so only in my mind because I have never heard anyone talk about such an effort taking place. Yet it is perhaps the most important effort that we as a planet can be engaged in right now. But we’re not doing it. We can hear the sound of Armageddon barreling down upon us, but instead of doing something about that we spend all our energy arguing over the contours of a three-week increase in the debt limit. What?!

The only time we think about patching our leaky roof is when it’s raining. When the sky is clear and it hasn’t rained for weeks, we forget about the roof. But pretty soon it’s going to start raining. It will rain long and hard and the rain will never stop. By then, it’s too late to think about replacing the roof. The same is true of the problem of our energy supply. We think a lot about alternative fuels when gas prices move in the direction of $4 or $5 a gallon. But when it’s below $3 a gallon, we forget about conservation and alternatives.

Yes, we face daunting challenges. And, we must confront them. Now.

The price of gas is irrelevant. Fluctuating gasoline prices are not the problem, but they do serve to intensify the challenges we face after decades of under-investing in surface transportation. If the price of gas goes up, drivers start using other modes that cannot handle the volume. If it goes down, we still have a massive congestion problem and current revenues from gas taxes are not sufficient. If we abandon gasoline-powered cars and a gas tax-funded surface transportation system, we could make up some of the needed revenues, but we would still be decades behind making the needed safety, capacity, and technology updates.

We have seen it before, and we are likely to experience it again shortly: as gasoline prices start to rise, Americans increasingly change their transportation habits – either by reducing trips, taking transit, or using another mode such as walking or biking. As prices begin to fall again people return to their cars and drive more.

The cynical person might interpret that trend as a clear sign that Americans prefer driving over other modes of transportation. That may well be, but it could also be an indication that we have not done a good enough job making the alternatives attractive. Transition to a VMT system or universal use of non-gas powered cars may be on the horizon, but not soon enough to guard against these behavioral changes due to price fluctuation. So while we need more investment to improve safety and performance on the roads, we also need investment in transit for the same reasons. If we couple that with more flexible work patterns and smarter development, we may see the preferences start to equalize.

We face daunting challenges. As we look to long-term policy developments, we must do all we can to provide safe and viable mode options and address our long term funding needs. In addition, we need to be open to advances in clean technologies that may turn all our predictions on their heads.

Bill Lind rightly points out that spikes in gas prices have shifted habits before, but only temporarily. Responsible legislators and policymakers need to do more than ricochet like pinballs every time public opinion shifts. They need to think about long-term trends and long-term needs. They need to be stewards for the public goods we have collectively invested hundreds of billions of federal dollars into—such as our national transportation system.

The reason to prioritize transit in the current economy is not that gas prices are rising this month. It’s that transit access means access to jobs, health care, education, and opportunity, especially for low-income people and people of color. It’s that transit saves American households who use it thousands of dollars a year. It’s that every $1 invested in public transportation generates $4 in economic returns. It’s that public transportation access and transit-oriented have been demonstrated to “provide large health benefits, including reduced traffic crashes and pollution emissions, increased physical fitness, improved mental health, improved basic access to medical care and healthy food and increased affordability.” (A good thing to remember when we start National Public Health Week on April 4.)

And beyond all these benefits, there’s another that everyone everywhere agrees on: public transportation helps reduce our country’s dependence on foreign oil, which has been a massive economic, political, and environmental burden for decades.

All this may be why, from 1995-2009, public transportation ridership increased by 31%—more than the 15% increase in U.S. population and the 21% increase in highway use over the same period. It may also be why 82 percent of Americans say “the United States would benefit from an expanded and improved transportation system, such as rail and buses,” and 79 percent of rural voters said the same.

In a time of economic crisis, not every public investment is an immediate slam-dunk. We need to walk a line between investing where it makes the most long-term sense and tightening our belt where we have no other choice. But when it comes to transportation infrastructure, the choice is an easy one. Transit is the way to move America forward. It shouldn’t take months of $4-a-gallon gas for legislators and policymakers to understand that. But if it does, we look forward to hearing them sing a new tune.

The only thing in shorter supply in Washington than an uncongested highway or an un-crowded Metro car is courage. I’m sure most people in America sincerely believe their own elected representative is a terrific person, full of courage and other virtues. But when you bring them together into a mass of 535 people in the U.S. House and Senate, they seem to become a spineless mass – a worm.

Looking at the ACTIONS of Congress with respect to the gas tax – which has not been increased since 1993 – the clear message to me is this: It’s okay to spend hundreds of billions of dollars per year on two wars in the Middle East. But somehow it’s NOT okay to increase the gas tax to (1) reduce our dependence on carbon based fuels, (2) encourage the transition to alternative fuels, and (3) raise money to support a highway program that cannot possibly be supported by existing user-fee based revenue sources.

In short, we have our goals and incentives all screwed up. No amount of excuses and rationalizations will make the situation any better. The situation in Japan right now – large swaths of which have been destroyed by earthquake, tsunami, and nuclear meltdown – is a cautionary tale for the U.S. I suspect that nothing meaningful will happen in the U.S. with respect to energy policy and transportation policy until we face a crisis that is equal to or greater than the tragedy we are now witnessing in Japan. Unfortunately, we can’t seem to have a New Deal unless we also have a Great Depression. Looking to the future, we are not likely to have a “Transportation Renaissance” without a “Crisis of Unimaginable Proportions.” I fear for our country and our soul.

In the 2008 Presidential election during the gas price spike, both John McCain and Hillary Clinton called for a “gas tax holiday” in response to rising gas prices. This was despite the fact that 18.4 cents per gallon was a fraction of the increased costs, and that the Highway Trust Fund was already facing substantial revenue shortfalls. Notably, candidate Barack Obama declined to join the other candidates in suggesting this policy.

The point of this story is to recall that, when faced with higher gas prices, a likely response from elected officials is to attempt to reduce the cost of buying gas. And we can understand why they might want to do so. Gas price spikes cause real pain for people who have shaped their household budgets based on the assumption of cheap fuel, and have limited disposable income. In many cases, middle and working-class Americans live in communities where they have inadequate transportation alternatives to gasoline-powered vehicles. Extreme dependence on one form of transportation has its risks, one of which is that of price spikes.

But the longer-term view necessitates broader thinking than simply lowering the cost of gasoline. If people feel pain when gas prices rise because they have no alternative, it makes sense to provide grants and incentives for states, cities, and communities to develop alternatives. However, dependence on federal fuel taxes for revenue means that the goals of lowering transportation costs for those who cannot afford to pay more and increasing transportation alternatives are inherently in conflict.

Alas this is one of the downsides of the “user-pay” system we have created for transportation. There has been much discussion on this blog about the benefits of user-pay, but the drawbacks are worth equal examination.

Congress will only change the current and long-standing pattern of transportation funding in response to constituent demand. The public has to want more and better transportation, and it must also put a high priority on that want.

As we have seen, high gas prices increase public transit ridership and raise demand for smaller, more fuel-efficient cars - - temporarily. As soon as prices fall again, people go back to their old habits. In the long term, nothing changes, including public policy.

What is needed, and what our Center has proposed for some time, is a regular, periodic, planned increase in the price of gasoline - - not the gas tax. Legislation should set a goal of increasing the gas price (for example) 25¢ annually. If the market price of gasoline fell, the tax would rise to create the planned price. Similarly, if the market price of gas rose beyond the planned increase, the tax would be reduced by the amount that exceeded the planned increase. At some point, market price increases could overwhelm the tax cut and raise the price well beyond what was planned - - the tax should never become less than zero, i.e., a subsidy - - but such a dramatic increase would probably be temporary.

If everyone knew the gas price would rise annually by a set amount, permanent changes in behavior would be likely. Such changes would probably include choices of vehicle and residence location and demand for public transportation.

At present, with the market price of gas soaring, our approach would require a cut in the gas tax, and thus revenues for highway funding. Since miles traveled also usually decrease when gas prices rise, a cut in spending on highways would be required but should be absorbable. In the long term, our proposal would raise revenues from the gas tax, barring sustained, large and repeated increases in the market price. Should that occur, an emergency program to expand public transportation (including intercity trains) would almost certainly result, at the public’s demand. The demand would be such that political support for using general revenues would not be a problem.

William S. Lind

Director, The American Conservative Center for Public Transportation

Even before gas prices went up it was extremely unlikely that a reauthorization bill would include an increase in the gas tax in any form, not even an increase, which would be deferred until the economy improved, or an increase which would be indexed to inflation.

The recent increase in gas prices is almost certain to lead to even more resistance to a gas tax increase.

It also seems unlikely that the recent increase in the price of gas would add support for a shift from a gas tax to a Vehicle Miles Tax. A few years ago, VMT was thought to be a good means of ensuring adequate revenues for the Trust Fund, overcoming the deficiencies of the gas tax. The gas tax is a flat tax per mile and doesn’t automatically adjust for inflation. It yields less revenue if drivers drive less, or if they switch to more fuel-efficient cars. However, a VMT would solve these problems only if it included automatic increases to cover inflation and a decline in miles driven. In other words, a VMT would require drivers to pay more. Proponents of a VMT seem to assume that drivers would be willing to pay more under a VMT than they now pay under a gas tax. Why?

If there was any chance that drivers would not be aware that a VMT would cost them more, we can be sure that in today’s political environment the anti-tax crowd will seize on this issue. That is probably why White House Press Secretary Gibbs stated on February 20 that a VMT “is not and will not be the policy of the Obama administration.”

The increase in gas prices will make motorists even less willing to pay more through a VMT.

The importance of public transportation to the U.S. economy’s resurgence cannot be underestimated. Each weekday, more than 35 million trips on public transit systems connect Americans to their jobs, education institutions and families—not to mention the benefits of reduced emissions and less congestion on highways. So keeping public transportation both accessible and operative at the most efficient levels should remain a top priority for the Administration and lawmakers on Capitol Hill.

This week, APTA released a new study that takes a close look at the potential impacts of rising gas prices in the near- and long-term. The research examined the effects of gas price elasticity—the point at which an individual would change his or her driving behavior—and extrapolated those findings to present day circumstances. The analysis reveals that if gas prices reach $4 per gallon for regular gasoline, U.S. transit systems stand to experience an increase of 673 million passenger trips this year. If prices were to reach $5 per gallon, we’d more than likely see passenger trips rise by 1.5 billion rides on public transportation this year. These figures represent significant increases in ridership for U.S. public transit systems at a time when infrastructure, service standards and overcrowding are top of mind for every transportation administrator throughout the country.

APTA has seen this story play out before—for instance, when gas prices rose in 2008, local public transit systems found themselves with scant resources to deal with the rise in demand for their services. More than half of U.S. public transit systems experienced overcrowding and more nearly 40 percent had to turn away passengers. The story can have a different ending this time around, however.

This year the President laid out a blueprint that would significantly increase funding in public transportation—by 128 percent—and deliver the much-needed financial support that would allow more and more Americans to regularly commute with a substantially smaller environmental footprint.