The Oil Drum: New York City

Helping New Yorkers understand, prepare and adapt to the implications of Peak Oil

Friday, September 02, 2005

Gas Is So Cheap!

While everyone else in the country seems to be complaining about high gas prices are, I'm lamenting how cheap it is compared to Amtrak.

I'm planning a trip from NYC to Washington DC for the weekend and I wanted to see if the new gas prices at $3-3.50 would make Amtrak more competitive for two people to take the train instead of drive. NY Penn Station to Union Station in DC is about as well traveled an intra-city rail connection as there is in the country. It only takes about three and a half hours each way and trains run pretty much every hour.

So let's do the math on the incentives to drive vs. take the train, assuming we simply park the car when we arrive and do not use it for anything except intracity transportation:

Amtrak ticket: $80 each way, $160 roundtrip (no discount for RT!)
2004 Honda Civic: 250 miles, 30 mpg, assume $3 and $3.50/gallon gas = $25-30/each way. That's really cheap compared to the $80 Amtrak tickets.

Not that most people factor this into their plans, but gas is only a fraction of the cost of using a car for this trip. Let's assume parking is $25 each night x 3 nights. Tolls will be another $15 each way (bridge/NJ Turnpike/Tunnel). That brings us up to a total roundtrip cost for the car to $155-165. Ok that's competitive on the margin for one person to take the train, but remember this was a two person trip, meaning the car costs would be cut in half. This is the power of carpooling.

For me this exposed several issues:
1. Despite all the groaning out there about gas prices, I truly doubt that this will change behaviors except for some financially strapped people on the margins who really can't afford to pay for the extra gas. Gas is a pretty good value at $3/gallon.

2. Amtrak needs better funding to compete with the auto/airline industry. I think the government should take on more of the burden of investing in improving the rail infrastructure (like it does for highways!) and start to introduce more competition for regional passenger rail services. Even drivers should support these proposals because this takes cars off the road - less traffic.

3. Having alternatives helps you make solid financial calculations to decide what your incentives are, but unfortunately for many people there is no alternative to their car. We need to identify opportunities to expand mass transit into suburban communities, assuming they become interested in increasing their range of choices.

Ultimately I convinced my travel companion to take the train simply to do our part for lowering consumption during our time of need. So there is my contribution for the cause this weekend.

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At 3:43 PM, Anonymous Anonymous said...

Of course, you also could have driven and donated your savings to relief charity. Just a thought...

At 4:48 PM, Anonymous Anonymous said...

This is the first post I read on your blog... you might be an expert on the topic of transportation. I am not.

I wanted to comment on #2. About a year ago, I heard a piece on NPR about Amtrak spending. It was not good. They use their money very poorly/inefficiently by investing in routes that are not heavily traveled (and remote) that serve small communities while not increasing service where really needed. In addition, there was some talk of overpaid executives. Therefore, you get a this kind of fare. On the whole, I got the impression it was an old, bloated organization that needs to spend their money better, not more of it.

At 4:20 PM, Blogger AD said...

Peak guy, great post! You're right, gas is still really cheap, especially compared with just about every industrialized country except Saudi Arabia (I forget where I saw that, so I don't have a link). Your calculation doesn't take into consideration the wear and tear on the car, and should somehow monetize the slight possibility of getting into an accident or getting a traffic ticket (both unlikely events, certainly, but still possible).

The fixed costs of owning a car are far greater than the variable costs of taking an individual trip. Vehicle depreciation is about $4,000 a year, while a year's worth of gasoline is not even $1,000. For a typical vehicle, the interest on the car loan is about as expensive as the gasoline charges. Once you sink the five figures into the car itself and the annual insurance and keep up on the maintenance on a regular basis, about the only variable cost that people see for a particular trip is the gasoline cost, and that's why it gets so much attention. That's why once you buy a car, it makes sense to use it for most trips. The most cost effective travel strategy is to pick a mode and stick with it. If you take the train, then always take train. If you buy a car, then always drive. Since most people own cars, this is part of what leads to more traffic. The captive audience of train riders is already in Amtrak's pocket. The drivers are all aready going to drive unless Amtrak slashes its rates by a huge margin.

One idea that would decrease the fixed costs of car ownership but increase the costs of individual trips (and thus reduce traffic) is pay-at-the-pump insurance. When you pay an annual rate for insurance, you are encouraged to drive more because more driving does not increase your insurance bill. But when you pay at the pump, individual trips would seem more expensive, and thus, drivers would have an incentive to switch to other modes. Different people have different auto insurance rates, but how much one drives, which is perhaps the best factor in predicting an accident, isn't really accounted for under the current system.

At 10:52 PM, Anonymous Anonymous said...

If it was a business trip, my company would reimburse me at a mileage rate of 42c/mile or just over $100 each way for a 250 mile drive. That's supposed to cover the cost of gas, depreciation of my car's value and insurance. If my company's HR/expense manager knew I could take Amtrack for $80 she'd definitely make me pick that option.

But as you point out, if it's a two-person trip then she'd insist we drive. Yeah, gas is cheap.

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