Glenn Gaven : The Sad Saga of Austin's $10 Million Concrete Path

Austin City Councilman Chris Riley on his trusty steed.
Image from chrisforaustin.com.

Taken for a ride:
The sad saga of the
$10 million concrete path

It is no coincidence that this segment of concrete treasure will run along part of Austin Councilmember Chris Riley’s pet project, a New Urbanist rezoning wet dream known as the Airport Boulevard Renovation Project.

By Glenn Gaven / The Rag Blog / April 9, 2013

AUSTIN -- With a zillion bicyclists and a historically dismal voting turnout, Austin, Texas, is a city where the bicycle lobby has more power than the Koch brothers. Realizing this, the transit authority, Capital Metro, and train enthusiasts turned to the two-wheeled mafia for help in passing a 2004 referendum to build a train system to bring commuters from the suburbs into the city.

The package the transit authority created was branded "All Systems Go,” and promised a glorious system of bicycle trails alongside the 162 miles of train track the Authority had already purchased over the years using the generous 1% sales tax dedicated to transit. The trail was to be built by 2007.

The referendum, which also promised a Bus Rapid Transit component by 2007 that has yet to be seen, passed and it was full steam ahead.

By 2007 the transit authority boasted having already spent 7.2 million dollars on the “Rails with Trails” program. That money had been spent on a feasibility study and presumably other prep work like surveying and engineering studies as no actual trail was in evidence as recently as January 2013.

In 2009, Capital Metro was awarded an American Recovery and Reinvestment Act grant for $1.9 million in free stimulus money to build bike trails. As you may recall the major stipulations for ARRA grants were that projects be “shovel ready,” and create new jobs. The transit authority happily accepted the money and promised the bike path would be built by 2010.

In February 2013, Smith Construction began demolishing a nearly new sidewalk adjacent a short section of Airport Blvd. to replace it with a “concrete path,” using $787,386 of the ARAA money. With the obligatory overruns associated with all Capital Metro contracts, Smith will likely collect a cool million to build the .9 (yes 9-tenths!) mile pathway that will run alongside a long-established bike lane, where there was already a sidewalk.

The rest of the money was given to McGray & McGray Land Surveyors and Klotz Associates, Inc, for “surveys” and “engineering studies.”

It is no coincidence that this segment of concrete treasure will run along part of Austin Councilmember Chris Riley’s pet project, a New Urbanist rezoning wet dream known as the Airport Boulevard Renovation Project. Riley and fellow Councilmember Mike Martinez represent Austin on the transit authority’s board of directors by night.

So, for a total of at least $10 million (7.2 + 1.9 + 15% built-in overruns etc.) we get almost a mile of what is basically a sidewalk where there was already a sidewalk and already a bike lane. According to City of Austin sidewalk coordinator John Eastman a .9 mile sidewalk outside of downtown typically costs $570,000. Those of us who used it can attest to its functionality and newness. That sidewalk is gone. Gone also is most of our $10 million which went into the pockets of consultants and contractors who have grown fat over the years feeding at the public troughs kept full by Mike Martinez and Chris Riley.

Next year, Riley and Martinez, along with the contractors like Paul Bury who built Martinez’ mansion, and train enthusiasts like Lyndon Henry and Glenn Gadbois will be asking Austin voters to give them the money to build a billion-dollar streetcar system in downtown Austin. Bicycling voters will determine yea or nay. It should only take the 90 seconds or so ride on Airport Blvd. between the Lamar Blvd. and Highland Mall to decide if we got our $10 million worth the last time.

[Glenn Gaven is a long-time Austin union activist who worked with the UT Shuttle Workers Union (ATU Local #1549) and was co-founder of the Bus Riders Union-ATX. Read more articles by Glenn Gaven on The Rag Blog.]

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Roger Baker : Can TxDOT Avoid Financial Disaster? / 2

Is a change of direction in order? Image from Cypress Creek Mirror.
Agency in denial:
Can TxDOT avoid financial disaster? / 2

By Roger Baker / The Rag Blog / February 1, 2013

"Denial isn't just a river in Egypt." -- Mark Twain

Second of a two-part series.

A glaring example of the Texas Department of Transportation's (TxDOT) denial of financial reality is that they view their roads in a way that confuses their assets with their financial position. This is made clear from TxDOT's 2012 Annual Financial Report (AFR), p 15, where we see this key statement.

Over time, increases and decreases in net assets measures whether TxDOT’s financial position is improving or deteriorating. Overall, the net assets of governmental activities increased by $710.7 million or 1.1 percent from fiscal 2011, primarily due to TxDOT’s continued efforts to maintain, improve and expand the state’s infrastructure network.

This characterizes TxDOT's financial viewpoint of highways as being financially beneficial assets, rather than as maintenance-demanding liabilities. By using construction costs to evaluate TxDOT's financial condition, the more it costs to build a road, the sounder TxDOT's finances are said to be. As we can see elsewhere in the AFR, TxDOT is claiming that the value of all its roads as assets is now about $64 billion, based on construction costs. They are public assets only so long as the public can afford to keep driving; otherwise they become a growing public maintenance burden.

TxDOT's roads are not marketable goods; few if any of its roads are marketable assets. This means that TxDOT appears to have nothing much to offer as collateral, to backstop its growing debt burden, to shield TxDOT against default on their $14 billion accumulation of road bond debt.

Is it possible to regard TxDOT's most traveled roads as collateral; as assets that TxDOT could plausibly sell to someone or some group willing to take them over and to manage them as private toll roads? We know that this is probably not the case because of TxDOT's inability to find a buyer for its CTTP group of Austin area toll roads, which are big money losers.

It is true that a few years back, TxDOT managed to sell the future tolling rights for the southern extension of their SH 130 toll road to a Spanish toll road operator named CINTRA, but those days are past. Freeways have become "costways."


TxDOT's toll roads are big money losers

Under Gov. Rick Perry's first appointee and close political ally, TxDOT Chairman Ric Williamson, TxDOT's philosophy was to try to attract money to build state roads supplemented with private funding as toll roads whenever possible. Williamson's slogan was that henceforth it was to be "toll roads, slow roads, or no roads."

This reflected an early approach to dealing with TxDOT's financial problems, stemming from the refusal of an anti-tax Texas Legislature to raise gas taxes. A decade ago, it was relatively easy to get private bond investors to supplement TxDOT's limited revenues by tolling and collecting fees; it was then anticipated that state toll roads could be profitable when operated as toll roads partially funded with gas taxes.

TxDOT first got into the toll road business with an initial group of toll roads, called the Central Texas Turnpike Project or CTTP. This was subsidized not only with direct TxDOT contributions, but also with a lot of Austin city money for ROW. The latter was demanded by the road lobby as the price to pay for the failure of Austin's 2000 light rail election.

Later on, after TxDOT became aware that its own toll roads were becoming management headaches, TxDOT and the Texas road lobby started actively promoting the establishment of newly authorized outside agencies termed "regional mobility authorities," such as the Austin area's CTRMA. These governmental bodies are able to wheel and deal and promote "public-private partnerships," partially supplemented with TxDOT contributions, but operating with fewer legal restrictions than TxDOT itself. They offer the additional benefit that TxDOT can't be held responsible whenever a RMA's toll road bonds default.

A July 2011 article by Austin American Statesman transportation reporter Ben Wear, reveals that TxDOT's own CTTP toll roads are big money losers, ones that TxDOT would like to sell if they could find a buyer. TxDOT's rather far-fetched selling point is to maintain that better marketing might somehow turn around their toll roads' current losses. TxDOT's "assets," if converted into toll roads, will probably always be money-losing liabilities.

Tolls and other revenue have fallen more than $100 million short of covering debt and operating costs of the state's three-road Central Texas Turnpike System since the highways opened about four years ago. Texas Department of Transportation subsidies almost 70 percent more than originally predicted have made up the difference. Those subsidies, covered primarily by state gasoline taxes that otherwise would be available for other road spending, should average about $38 million a year over the next decade and total about $750 million by 2042, according to TxDOT documents...

"Any dollar that we support that system with is a dollar that is taken out of the state of Texas to build and support other roads," said [TxDOT] Commissioner Ted Houghton of El Paso, who has served on the commission since 2003 and has long advocated such agreements with toll road companies. "We need to get out of that business. Find someone who knows how to market those roads, to operate them and collect the tolls. We do it as a sort of side business."

More recently, TxDOT's refusal to publicly reveal the revenue data on SH 130 , the most prominent of the CTTP toll roads, indicates that the lack of ridership is probably seen by TxDOT as a source of public embarrassment and an impediment to privatization. TURF, an active San Antonio-based anti-tolling group, has publicly announced a boycott of SH 130.


Total Texas and U.S. driving are both in decline, 
with little prospect for recovery

TxDOT doesn't want to admit it, but another important aspect of their institutional denial is the assumption that driving on Texas roads will someday resume its past growth. The reality is that Texans are driving less than they did just a few years ago. The author has already documented this problem and the link to rising energy costs in considerable detail.

Global oil prices have recently been rising rapidly, with little relief in sight. Despite the recent spate of publicity about increasing U.S.energy independence, the reality is that rising oil prices continue to haunt both the U.S. and global economies.

Nationally, an important factor leading to less driving is that the lower income third of the population is struggling to afford to drive at all because of rising fuel prices. We see this from a recent Brooking Institute study showing a strong correlation between car ownership and income level. Likewise, the U.S. population is aging, and older drivers drive less. Meanwhile, the young have become less interested in owning and driving cars.

When driving declines, so do Texas state and federal fuel tax revenues. Fuel taxes are TxDOT's major stable source of road funds, akin to TxDOT's financial oxygen supply. In his introduction to the 2012 AFR, TxDOT Director Wilson, notes that fuel taxes are up: "Motor fuel taxes, TxDOT's primary state funding source, shows a slight increase in fiscal year 2012 over 2011."

However, even this 2.8% increase in TxDOT's fuel tax revenue looks smaller when compared to TxDOT's total budget.

We know that Texas driving is currently decreasing because the FHWA documents total driving on roads in every state. Here are the final revised travel numbers in millions of vehicle miles on all Texas roads for the past six Septembers (the latest month available in 2012).

• 2007.....19,422
• 2008.....18,838
• 2009.....19,730
• 2010.....20,023
• 2011.....19,386
• 2012.....19,377

It is true that driving in Texas has decreased somewhat less than in the rest of the country recently. This is quite likely due to the hydrofracturing (or fracking) boom to the southeast of San Antonio. While the fracking may increase fuel revenue slightly, it is tearing up Texas state and county roads, and these damages on its state roads are being greatly underfunded by TxDOT.

The truck traffic needed to deliver water to a single fracking well causes as much damage to local roads as nearly 3.5 million car trips. The state of Texas has approved $40 million in funding for road repairs in the Barnett Shale region, while Pennsylvania estimated in 2010 that $265 million would be needed to repair damaged roads in the Marcellus Shale region.

And this from an NPR State Impact statement:

“With all the traffic, it’s destroying our roads. Some are already completely destroyed,” says Frio County Judge Carlos Garcia in South Texas. It’s in the heart of the Eagle Ford Shale formation, where oil production from hydraulic fracturing, or “fracking,” in nearby Karnes County now leads the state.

Public roads, especially those a few decades old, are by nature money losers which require a rising level of maintenance over time to remain useful. Asphalt and diesel costs for road maintenance have risen sharply during the past decade, along with rising oil prices; the crude oil used for making gasoline and diesel has more than tripled in price over the last decade.

Nationwide, driving decreased by about 1.6% in the last year, according to the FHWA TVT data for September 2012, as compared to September 2011; see lower right of this chart. We see that total U.S. driving peaked in 2007, and has fallen roughly 3% over the last five years. This bumpy downward trend line is largely due to a combination of a poor economy and rising fuel costs. Rising fuel costs contributed to the poor economy.

Over the same last five years, U.S. population has been increasing by about .75 % per year, which means a 3.75% U.S. population increase over this time. If you add both trends, per capita U.S. driving decreased nearly 7% in the last five years. People are driving less, while using transit more, except that U.S. urban transit typically isn't very efficiently matched to existing land uses and work trips.

Whither fuel prices? Globally, total liquid fuel supply has been flat since conventional (the old cheap stuff) oil production peaked worldwide about five years ago, and seems unlikely to rise much above 90 million barrels a day. Looking ahead, this implies a continuing recession and higher driving costs.


The rising long-term price of TxDOT's denial

TxDOT's current planning is in denial by being geared toward handling a most unlikely continuation of the rising car and road travel seen in past decades. Any shift away from road building is guaranteed to upset the Texas road lobby; a constellation of the big road contractors, land developers, and engineering firms. Together these comprise some of the most politically powerful interests in Texas, whereas TxDOT is one of the most politicized state agencies in terms of its policies and priorities.

Low density suburban sprawl growth encouraged and subsidized by publicly funded roads is beginning to be recognized as a type of Ponzi scheme. Whenever the rate of new growth slows down, the fact that this kind of growth doesn't pay for itself is revealed by the sorts of funding shortfalls that TxDOT is experiencing now.

In America, we have a ticking time bomb of unfunded liability for infrastructure maintenance. The American Society of Civil Engineers (ASCE) estimates the cost at $5 trillion -- but that's just for major infrastructure, not the minor streets, curbs, walks, and pipes that serve our homes. The reason we have this gap is because the public yield from the suburban development pattern -- the amount of tax revenue obtained per increment of liability assumed -- is ridiculously low.

Over a life cycle, a city frequently receives just a dime or two of revenue for each dollar of liability. The engineering profession will argue, as ASCE does, that we're simply not making the investments necessary to maintain this infrastructure. This is nonsense. We've simply built in a way that is not financially productive.

Arguably, the wisest mode of damage control to remedy its looming fundings shortfalls would be for TxDOT to shift its priorities toward preserving and maintaining at least the most important of its existing roads, including the interstates, non-interstate highways, and toll roads.

TxDOT needs to shift its focus away from planning roads it can no longer afford to maintain, and in the direction of public mobility by increasing the current minimal level of state funding for transit (the feds prefer to fund transit much more than TxDOT does).

Because of budget constraints, people increasingly need to live where TxDOT can still afford to fund and maintain transportation infrastructure and mobility and not a future overwhelmingly based on more cars and roads.

In the future, TxDOT's planning should be geared toward discouraging private vehicle travel. In fact, TxDOT really doesn't have much alternative to moving in that direction, either willingly or unwillingly. To try to continue their current denial of financial and travel demand trends can only make TxDOT's future problems worse.

Bottom line: If you have trouble driving to work, you shouldn't expect much help from TxDOT.

[Roger Baker is a long time transportation-oriented environmental activist, an amateur energy-oriented economist, an amateur scientist and science writer, and a founding member of and an advisor to the Association for the Study of Peak Oil-USA. He is active in the Green Party and the ACLU, and is a director of the Save Our Springs Association and the Save Barton Creek Association in Austin. Mostly he enjoys being an irreverent policy wonk and writing irreverent wonkish articles for The Rag Blog. Read more articles by Roger Baker on The Rag Blog.]

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Roger Baker : Can TxDOT Avoid Financial Disaster?

Maybe TxDOT should heed its own sign.
Warning sign:
Can TxDOT avoid financial disaster?

By Roger Baker / The Rag Blog / January 24, 2013

"Things can become complicated when you actually try to understand them." -- Richard Vodra

This is the first of a two-part series.

AUSTIN -- The funding shortfall at the Texas Department of Transportation (TxDOT) is about 50% of its entire budget. How did it ever come to this? TxDOT's roads are now at war with our schools, nursing homes, and health clinics in the Texas legislature, all fighting for survival level funding.

There is great pressure to use an official increase in state revenue to restore the big cuts made to education, health, and human services in the last Texas budget. Every sort of social and governmentally funded need is competing for a piece of the budget increase since Texas Comptroller Susan Combs recently declared a substantial increase in available state revenues compared to the last budget two years ago.

This coming budget battle leads us to an important policy question concerning TxDOT and its roads. How could anyone even hope to manage a state agency that, according to it own management, falls 50% short of its needs? Yet this is the situation described by TxDOT Director Phil Wilson as the Texas Legislature prepares to meet, wheel and deal, and eventually to hammer out TxDOT's two year budget allotment.

One way to lobby for road money, although they can't call it that, is by inflating future hypothetical travel and road construction needs. TxDOT director Phil Wilson describes the situation this way:

TxDOT needs an additional $1 billion-a-year alone to shore up its maintenance budget, he said. And going forward, the agency will likely need another $3 billion-a-year infusion to its current $10 billion annual budget to “address congestion long-term with a sustainable method.”

The reality is that TxDOT's proclaimed road construction needs of $3 billion a year are utterly unfundable pipe dreams appealing to road builders and land developers. By contrast, the estimate of $1 billion a year in maintenance shortfalls is probably way short, but maintenance lacks political sex appeal. In fact, Texas road maintenance has been underfunded to such a degree that "Texas received a 'D' in roads, ranking Texas from 17th in 2008 to now 43rd for highway spending per capita."

Lets take TxDOT Director Phil Wilson's claim at face value. If TxDOT's current budget is $10 billion and needs an added $1 billion in maintenance, and another $3 billion to deal with congestion, that means that TxDOT is already about 40% short. This picture of a dire need for money for new roads does not even consider the fact that TxDOT already spent a billion dollars more than it took in last year.

Once you add the $1 billion net deficit for this year, the claimed gap between the available cash and current spending plus claimed needs rises to about 50%! Further complicating this situation is the fact that TxDOT is now about $14.6 billion in debt, and the debt service alone required nearly a billion dollars in 2012. (See pages 13 and 28 of TxDOT's Annual Financial Report.)

Meanwhile, for accounting purposes, TxDOT is claiming its state roads as assets, all together worth about $64 billion. The reality is that TxDOT's roads should be seen as constantly growing maintenance liabilities. In the context of high oil prices, a stagnant economy, and reduced driving, TxDOT's roads are like an oil-addicted, tax money-starved monkey solidly chained to the back of Texas taxpayers for the foreseeable future.


Texas Road Politics 101

TxDOT offers an important window on Texas politics, both because of the large size of the budget and because of the opportunity for political interests to affect the budget, which can change a lot from year to year, depending largely on legislative whim.

How could things be otherwise? Texas has been ruled since its early days primarily by its landed gentry, first those tied to agriculture, then to the oil interests. A strong focus on "property rights" has been basic to Texas politics ever since the Texas constitution was written, soon after the Civil War, after the Yankee "carpetbaggers" were expelled.

Celebrated Texas journalist Molly Ivins used to call TxDOT "the Pentagon of Texas" for good reason. TxDOT roads have been a political pork barrel for many decades, with all that this implies. In the 1920s, soon after the formation of the  Texas Highway Department, as it was then called, Texas Gov. James E. (Pa) Ferguson got caught up in a Texas road contracting scandal, which forced him to resign and have his wife Miriam A. (Ma) Ferguson become a replacement governor. After this, the Highway Department kept its nose clean for a few decades, particularly under director Dewiltt Greer.

In recent decades, Texas road contractors have regained their old clout as key political players, nowadays in alliance with suburban sprawl land developers. The latter have benefited greatly from publicly funded roads that serve new development ringing the urban areas where most Texans now live. During Gov. Rick Perry's first term, the big road contractors gave him more than $1 million in campaign contributions. Texas is the kind of state where it is always possible to bribe a politician, as long as you call it a campaign contribution.

Gov. Rick Perry appointed a fellow Texas Legislature warhorse and friend, Ric Williamson, to chair the Texas Transportation Commission, TxDOT's governing body, when Perry first got elected. TxDOT Chair Williamson pulled out all the stops to promote Perry's hugely unpopular $185 billion Trans-Texas Corridor -- a deluxe road building solution in search of a future problem to solve.

Williamson died in 2007, and Perry appointed another close associate, Deirdre Delisi to chair the Commission. A little over a year ago, in September 2011, Perry appointed Phil Wilson, one of his top advisors, to be director of TxDOT and its budget. He was appointed to solve TxDOT's problems at a time when that agency had become distinctly unpopular with the legislature. With Wilson installed to manage TxDOT policy from the inside, there was no longer the need to control the Commission from the outside. Delisi resigned soon thereafter.

Before Wilson's appointment, TxDOT directors had all been engineers promoted from within TxDOT's own ranks. This had the effect of limiting TxDOT's top management to those good at building roads, but not necessarily those good at politics or balancing budgets. By most accounts, what Wilson brings to the table is smarts and skillful politics. Wilson's approach seems geared to working harder to raise money to build roads or toll roads as usual. This rather than facing the political reality that the traditionally entrenched transportation solutions and trends are so unsustainable that they demand a basic shift in transportation policy away from roads.


TxDOT has embraced a mountain of new road debt, despite deteriorating finances

It was clear that TxDOT was an agency in deep denial even several years ago when Paul Burka quoted a newly released legislative report on TxDOT in this 2010 blog post:

At present, State Highway Fund revenues are not as stable as in previous years, nor are they continuing to increase at the same pace as in the past. In addition, from 2005 through 2007, TxDOT used a combination of State Highway Fund revenues and bond funding for operations and capital investments. During this period their expenditures for these areas outpaced revenues, resulting in TxDOT using approximately $700 million of reserves to pay for operating and project expenses during this period...

First, when TxDOT bumped up spending through the use of bond funding, baseline expectations for TxDOT spending levels in any given year were raised both inside and outside the organization, even though that approach was not sustainable and represented a marked deviation from historical spending levels. Second, TxDOT incurred a significant debt service burden associated with the bonds it issued -- and that servicing reduces the availability of General Revenue and Fund 6 dollars for TxDOT to use for operations and new projects. [In other words, the bondholders had to be paid from the funds -- general revenue and Fund 6 -- that were being used to pay for the projects.]

The end effect is that TxDOT’s available budget (for maintenance, new projects, etc.) is effectively lower than it would have been before the bond funding was issued. At the same time, maintenance requirements are increasing as a result of having increased the size of the highway system (every new road brought into the system must be maintained).

To which Burka responded:

In other words, the Legislature acted in a fiscally irresponsible manner when it issued several billion dollars in bonds to pay for road projects. By going into debt to build roads, TxDOT ended up with less money for new roads than if it had just used gasoline tax money. This is what happens when lawmakers spurn the pay-as-you-go principle. This is not fiscal conservatism. This is spending beyond your means. You can’t blame TxDOT. The blame belongs with the Legislature and in particular the leadership at the time, Dewhurst and Craddick. And with the voters, who approved the bonds...

Since this was written, not a lot has changed. TxDOT still likes the idea of toll roads, just so long as someone else is responsible for managing them. There has been no discernible shift in policy away from trying to build as many roads as fast as possible. Roads are considered urgently necessary to meet TxDOT's hypothetical, but always increasing, future travel demand estimates.

A growing number of TxDOT roads are now being built with the help of a sort of road bidding competition. This demands that local government contribute matching funds to help TxDOT pay for construction. With the "pass-through tolling" being encouraged by TxDOT, TxDOT helps by building a road while a county (like Williamson and Hays near Austin) helps front the money. The county gets reimbursed by TxDOT, but ONLY if the projected traffic shows up in TxDOT's subsequent traffic counts.

As an agency currently in obvious financial trouble, TxDOT is doing whatever it can to shift its debt burden toward private lenders, toward local level government, and toward making roads a general obligation of Texas government.

In Part 2 of this series we will take a closer look at why TxDOT's denial of current trends is leading to financial disaster.

[Roger Baker is a long time transportation-oriented environmental activist, an amateur energy-oriented economist, an amateur scientist and science writer, and a founding member of and an advisor to the Association for the Study of Peak Oil-USA. He is active in the Green Party and the ACLU, and is a director of the Save Our Springs Association and the Save Barton Creek Association in Austin. Mostly he enjoys being an irreverent policy wonk and writing irreverent wonkish articles for The Rag Blog. Read more articles by Roger Baker on The Rag Blog.]

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Roger Baker : Oil Addiction Generates Denial

Political cartoon from the LA Progressive.
Oil addiction generates denial

The major sin of the big oil companies was to get their customers addicted, to set up lobbies to keep them addicted, and to deny the looming shortage problem, including the threat of global warming.

By Roger Baker / The Rag Blog / May 23, 2012

It’s easier to fool people than to convince them that they have been fooled. -- Mark Twain

Denial is a basic symptom of addiction that involves hiding the truth, refusing to talk about the problem, rationalizing, or dismissing the situation -- defensive patterns of behavior that the addicted employ to avoid facing reality. This same principle of denial holds true whether the addiction applies to an individual or to an entire nation.

It is certainly no exaggeration to say that the United States has been a nation addicted to a continuous supply of cheap imported oil for at least the last 35 years. This has been so ever since President Jimmy Carter promised to take a leadership role in breaking our oil habit in 1976. At that time he characterized the U.S. energy crisis as the "moral equivalent of war." The USA has been in denial ever since.

By 2006, our imported oil habit was still growing and caused about 35% of our trade deficit. (See Figure 1 in this link.) Since then, we have been able to produce more oil and cut back on our oil imports (see Figure 3), but now it has risen so much in price that it constitutes about 60% of the total U.S. trade deficit. Transportation, mostly driving, still accounts for about 70% of U.S. Oil consumption, despite the fact that driving has declined slightly after peaking in 2007.

Oilman and President George W Bush, who was in an excellent position to understand such things, openly declared our national addiction in his state of the union address in 2006:

Here we have a serious problem: America is addicted to oil, which is often imported from unstable parts of the world.

From President Carter to President Bush Jr., our imported oil habit became progressively less sustainable, as the cheap oil was used up. If the continuous stream of tankers that export oil from the Persian Gulf region should be interrupted now, the price would immediately rise to a level that would make fuel unaffordable to many U.S. drivers, and to a degree much more painful and disruptive than we experienced in 2008, or in recent months.

Our continuing addiction to Mideast oil accounts for the vast U.S. military force that we have stationed in the Persian Gulf, which region provides a large and growing portion of the world's total oil supply. It is sometimes claimed that because the United States gets most of its oil from sources closer than the Gulf region, we are not highly dependent on this region. However, since the oil market is global, any oil supply interruption in the Gulf region would soon translate to high prices everywhere else. The Chinese would soon bid against the USA for the fuel produced from the Canadian tar sands, etc.

Europe, by comparison, has been been largely shielded from big fuel cost increases by its already much higher fuel taxes. These taxes have forced its drivers to adopt lifestyles that minimize their fuel consumption, and thus protect them more from a global oil price rise.

Whenever the U.S. supply of imported oil is threatened with interruption (or if the U.S. economy should recover much), the global marketplace bids up the oil price, and the politically sensitive price of gasoline will rise in step and depress consumer spending . Whenever the world oil price is high enough, it can cause an economic crisis. In this case global demand may contract sharply, as it did in 2009. The price can never rise for long above what the global oil market can bear.

In 2008 we found that limit as we approached $120 a barrel for oil and $4 a gallon for gasoline. Prices are once again beginning to kill demand in the U.S., but under a slightly lower ceiling, because the economy isn’t nearly as strong as it was in the first half of 2008. Now the ceiling is closer to $100 a barrel.

Young people are more inclined to kick their oil habit

The lower third of the U.S. population by income increasingly cannot afford to drive at all.

As a result, many young people in particular seem to be culturally rejecting car ownership as a lifestyle goal, and are arranging their lives so as not to require cars. According to a new report ,

The average annual number of vehicle miles traveled by young people (16 to 34-year-olds) in the U.S. decreased by 23 percent between 2001 and 2009, falling from 10,300 miles per capita to just 7,900 miles per capita in 2009. The share of 14 to 34-year-olds without a driver’s license increased by five percentage points, rising from 21 percent in 2000 to 26 percent in 2010, according to the Federal Highway Administration.

The road lobby, sprawl developers, and climate change denial lobbies all have a dog in the fight and are happy to support groups that help perpetuate oil addiction denial. The Antiplanner, funded by the Cato Institute, is one prominent voice of denial. This Libertarian think tank, founded by one of the Koch Brothers, is still a bit too independent and they are trying to regain control again.

In fact there is now a wealth of evidence for a deep shift in driving behavior.

America’s transportation policies have long been predicated on the assumption that driving will continue to increase. The changing transportation preferences of young people -- and Americans overall -- throw that assumption into doubt. Transportation decision-makers at all levels -- federal, state and local -- need to understand the trends that are leading to the reduction in driving among young people and engage in a thorough reconsideration of America’s transportation policy-making...

In accord with the nature of politics, unhappy voters tend to seek political scapegoats to blame for their pain at the gas pump. As a nation in denial of addiction, we seek external causes other than our own behavior, dependent as it is on this unsustainable resource. As a nation, we uniquely depend on private vehicles for commuting as an integral part of the U.S. lifestyle.

Given all the media attention it has attracted over the past few years, the public seems to understand that maintaining the U.S. oil supply is important. They also believe that their driving dependency is tied to political policy. This leads to the false hope that, by choosing the right president, their driving might remain more affordable.

Given this situation, it is easy to understand why the recent rapid rise in the cost of fuel has become a political issue. Likewise, the recent modest decline in fuel price might seem to indicate that some kind of mysterious factor other than a natural oil shortage is at play.

It is hard for the average driver to understand that the price of gasoline is closely tied to oil demand on a global scale; that the cost of domestic gasoline is closely linked to the global market price of crude oil, and that its price rises and falls accordingly. Here we can see that the average U.S. gasoline price closely tracks the price of Brent crude, the global benchmark standard, even more closely than it tracks the price of the WTI grade of crude oil still produced in the USA.

Other factors can be important too, like transportation and refining bottlenecks, but the cost of crude oil is primary. Global supply and demand, including our domestic demand that uses more than 20% of the world's crude oil production, are the basic factors that determine what we will pay for our gasoline and diesel fuel. Because of our addiction , we seek scapegoats and seek to deny the need to change our own behavior.


Scapegoats for the right

Republicans make the absurd claim that the federal government and environmentalists have prevented the U.S. oil industry from producing enough oil to lower the price of gasoline. The attempt to portray any possible increase in domestic oil production as being sufficient to significantly lower the global price of oil is ridiculous but certainly attracts media attention.

The truth is that we are in the middle of an oil and gas “fracking” boom widely opposed by environmentalists. This drilling boom has indeed lowered our domestic natural gas price confined to areas within easy reach of gas pipelines, but it cannot much affect the price of oil, since oil is relatively cheaply transported by transoceanic tanker to the highest bidder.

The Republicans still contend that enough of an increase in petroleum could be obtained by increased domestic drilling so that it could lower the price of fuel, even down to the $2.50 a gallon gasoline that Gingrich was promising. Few in the oil industry seriously take these claims seriously, but it is the sort of talk that draws a lot of political attention. Mitt Romney has even called Obama to fire his three top energy advisors.

To be realistic about our current situation, the formerly cheap "conventional oil" that was produced by onshore drilling, which helped the USA win WWII, has nearly all been pumped up and is gone forever outside the Mideast. We now have to rely on much more expensive and hard to produce “unconventional oil" sources, like deepwater offshore wells -- especially since 2005.

In the current global market, the reality is that the fruits of increased domestic production will be sold to the highest global bidder by the multinational corporations like Exxon.

The price of crude oil has increased globally by a factor of five from $20 to $100 in only about the last decade. In terms of the physical infrastructure appropriate to lubricating and growing a profitable world economy, this has had a profound and deep-seated economic effect, an global economic shock that has been felt everywhere as reduced profits throughout the global economy.


Scapegoats for the left

Democrats and critics of the business community naturally choose different scapegoats than Republicans, often on grounds that sometimes seem almost as far-fetched. These scapegoats tend to be the big oil companies, Wall Street oil speculators, and the oil refiners.

There is little that Exxon can now do to reverse the chronic oil dependence that they have done so much to help create and perpetuate. They are in effect the beneficiaries of a once-abundant, but now increasingly scarce resource in an era in which the production cost is steadily rising. As Exxon's own reserves of cheap oil run short, they want to stay in business as middlemen, brokers, refiners, and producers of this increasingly scarce fluid vital to the continued functioning of the U.S. economy.

The major sin of the big oil companies like Exxon Mobil was actually, in large part, to get their customers addicted to their products in the first place, to set up lobbies to keep them addicted, and to deny the looming shortage problem, including the threat of global warming. This was recently detailed in the New Yorker. Obama's response to being blamed for high oil prices has been more political than focused on informing the public of their addiction:

The President’s policies toward the oil industry are not easy to categorize. His actions -- attacking oil-company profits while proposing more oil drilling -- can best be understood as political responses to rising gasoline prices.

Obama is quite willing to take advantage of the unpopularity of speculators as scapegoats . The Democrats don't have a coherent position on energy, but as politicians they still have to represent a public angry about fuel costs. What Democrat could resist blaming Wall Street and commodity speculators for driving up oil prices?

With gas prices continuing to soar, 70 members of Congress on Monday pushed federal regulators to stop excessive oil speculation. The House and Senate lawmakers -- all Democrats -- wrote to the Commodity Futures Trading Commission to urge the agency to immediately put in place limits on traders in crude oil markets and take whatever steps necessary to rein in prices at the pump.

"It is one of your primary duties -- indeed, perhaps your most important -- to ensure that the prices Americans pay for gasoline and heating oil are fair, and that the markets in which prices are discovered operate free from fraud, abuse, and manipulation," the lawmakers wrote in a letter organized by Sen. Bernard Sanders...

The problem with blaming Wall Street speculators is that so much of the oil market is global, like the London exchange. In any case, price hedging is a legal and intrinsic part of a normal market involving buyers and sellers. Nailing down future delivery is the natural inclination of commodity dealers operating in a tight market.

The successful speculators tend to amplify price trends, rather than changing market direction. Speculation is a normal part of the business of airlines, for example, who do a service by anticipating and evaluating future fuel price risk. By anticipating future shortages, they make it hard to deny that there are looming oil supply problems that we urgently need to face.

"The fact is that there really are logistic challenges for Europe to replace Iran as a source of oil, and those challenges are going to translate into a higher price," said James Hamilton, an economist at UC San Diego who has studied past oil-price spikes.

Reasonable voices are no match for addiction denial

Not everyone in Congress has been in denial of our precarious U.S. oil import position. Republican Senator Dick Lugar recently posted an article -- "High gas prices threaten recovery" -- which explained that there is practically no global spare reserve capacity left to cushion a sharp oil price rise, due to an inflexible and increasing global oil demand in conflict with a fixed global oil supply.

Price stability depends on a cushion of excess oil production capacity that could be brought online within 30 days or so if needed. A good rule of thumb is 5 percent of the market -- now about 4.5 million barrels per day -- is a sufficient cushion. Drop much below that, and the market cannot easily cope with planned or unplanned outages...

The cushion today is just 1.4 million barrels per day of spare capacity in a global market of approximately 89 million barrels, according to analyst Bob McNally, of the Rapidan Group. Some estimates are even lower. That thin margin already inflates prices, but it also puts global oil markets on the edge of massive upheaval.

Senator Lugar offered his "Practical energy Plan," which amounts to taking a lot of simultaneous emergency measures to expand domestic fuel production, while reducing consumption. While this is good advice, it would certainly take more time and require more political will than we have available.

However even these kinds of sensible warnings by a moderate Republican Senator are apparently too much for the right-wing oil addiction deniers to tolerate. The Koch brothers, who became super-rich from petrochemicals, helped fund FreedomWorks, part of the opposition that successfully knocked Sen. Lugar out of the Republican primary, and thus removed a respected political moderate.


Little time left to deal with our addiction

Rising gasoline prices should ideally be welcomed as a warning of what is soon to come. One of the keenest observers of the geopolitics of oil and the precarious nature of our U.S. oil dependence is Michael Klare.

Because the American economy is so closely tied to oil, it is especially vulnerable to oil’s growing scarcity, price volatility, and the relative paucity of its suppliers. Consider this: at present, the United States obtains about 40% of its total energy supply from oil, far more than any other major economic power.

We will now have to prepare for major economic changes and high gas prices. Oil and politically sensitive gasoline prices have receded in price the last month, but this is in no way a sign that our lives can return to the cheap oil era of the past. We are busily preparing to fight Iran. The energy wars are heating up globally . The hour is getting late.

Klare now calls on Obama to be honest about the true gravity of our current situation.

President Obama has to be honest with the public. There is no solution to high prices, other than a change in the behavior of our energy use, because there is no cheap oil left on the planet. We have to begin a process of converting to alternative forms of energy or alternative forms of transportation. And he has to be honest.

Will we wake up and face our oil addiction denial in time? As they wisely say, you can evade reality, but you cannot evade the consequences of evading reality.

[Roger Baker is a long time transportation-oriented environmental activist, an amateur energy-oriented economist, an amateur scientist and science writer, and a founding member of and an advisor to the Association for the Study of Peak Oil-USA. He is active in the Green Party and the ACLU, and is a director of the Save Our Springs Association and the Save Barton Creek Association in Austin. Mostly he enjoys being an irreverent policy wonk and writing irreverent wonkish articles for The Rag Blog. Read more articles by Roger Baker on The Rag Blog.]

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Roger Baker : How High Gas Prices Are Putting the Hurt on Average Drivers

Cartoon from The Smoking Jacket.
How high gas prices are hurting
average drivers (and voters)

By Roger Baker / The Rag Blog / March 22, 2012

[This is the first of a two-part series.]

High gasoline prices are probably hitting the average driver and voter harder than most people think. The numbers indicate that typical adult wage earners, meaning average voters, are already being hit hard by a combination of a depressed economy and stagnant pay, while having little choice but to pay higher gas prices.


Income distribution and trends

The wage trends here show that average U.S. earned wages (with the average being distorted upwards by the high income end) have been almost stagnant since 2007. This means that if the bottom half of wage earners were hurting in 2008, they are probably still hurting about as much now.

Most people who own their homes have seen their homes, as their major investment, decline in value. Also most other savings and investments have not prospered, with interest rates on banked savings remaining at near zero. "Core inflation" is said to be only a few percent, but inflation is being officially underreported with non-discretionary prices, which are a bigger part of low income household budgets, rising faster than discretionary costs.

We see here that the median 2010 household income in the United States was about $50,000, with half of household total earnings less. We can also see a big household income bulge at the low income end, with the largest percentage of household incomes centered on about $20,000 total per household.



This shows how many must be struggling to drive when the cost of driving is considered. If we assume two adult wage earners in many households, this would mean that each would be earning or receiving through benefits only $10,000 on average. Perhaps this is due to the unemployment of one, or part time or minimum wage jobs, or relying on social security or pensions as their primary income.

If the household consists of a single mother with an income of $20,000 and a child or two, there are the added costs of raising children. Whatever the reason, car ownership is increasingly dependent on income for a large portion of U.S. households.

In 2008, the Brookings Institution provided further evidence that the lowest income third of the population in particular seems to be struggling to drive at all. See the chart showing the highly significant correlation between income and car ownership.



These numbers, although a few years old, indicate the degree that low income households live in an economic twilight zone, an income level where a major lifestyle barrier determines whether or not they can afford to own and maintain a car.

How does income compare with what it costs to drive?

Here we see that the typical cost of owning and driving a family car was nearly $8,800 in April 2011.

The average annual cost to own and operate a sedan in the USA, based on 15,000 miles of driving, rose 1.9 cents per mile to 58.5 cents per mile, or $8,776, says AAA’s 2011 “Your Driving Costs” study. The increased costs to own and operate a vehicle were driven mainly by large increases in fuel prices, depreciation costs and tire prices, says John Nielsen, AAA national director of auto repair, buying and consumer programs.

Below is an expanded five year chart of aggregate U.S. urban transportation costs, a Saint Louis Federal Reserve FRED chart. Transportation costs in U.S. urban areas, where most folks live, have now exceeded mid-2008 costs and are crowding out other living costs at the lower earnings end of the wage spectrum. We see the total cost of getting around in U.S. cities by all means (which means predominantly cars) rose rapidly to end 2011 at a new record high level.


This series is charted monthly, but stops in December 2011. Looking at fuel price increases since then, and judging from the impact of fuel prices in recent years, it appears that the current cost index would probably be nearly 230, assuming the graph were continued to show the effect on driving costs of the big fuel price increases in the first few months of 2012.

In other words, since April 2011 of last year, the cost of owning and driving a car has increased roughly by a ratio of 205 to 230, or about 12%. That means that if the total driving cost was almost $8,800 a year ago, the urban travel cost consisting mostly of cars would now have risen to roughly $10,000 on average.


A recipe for frustration

For the many households with about $20,000 in total income, there is likely at least one adult who would want to own a car and drive, much as adults in the wealthier households do. However, even if a wage earner earns $20,000 a year, the $10,000 cost of car ownership and maintenance would now require about half their income.

There is no way to avoid the conclusion that many wage earners at the lower end are struggling hard to pay for food and rent and still drive a car to work, and that higher driving costs are forcing them to shed cars. This probably accounts for the current political focus on gasoline prices.

Among people in the lower 50% of household income level, many of whom can manage to afford to drive, fuel price increases must necessarily involve difficult choices, with a strong tendency for fuel costs to crowd out and depress other spending. Once discretionary spending -- like eating out and entertainment -- has been eliminated, life becomes a matter of balancing frustrating choices.

For many, the cost of the fuel needed to commute to work in aging cars (who can afford a new electric car, as opposed to keeping the old one running as long as possible?) has become a symbolic high-profile political issue.

For lower income residents in particular, it is easy to see why fuel price increases have become a source of anger; a red flag for so many average voters. (Part 2 of this series will look at what the public opinion polls are saying, and how and why rising fuel prices are becoming such a hot topic for the upcoming presidential race).

A large part of the new residential housing in recent decades has been suburban in nature, assuming a lifestyle that almost demands the use of the private automobile. Suburban sprawl development on the fringe of U.S. cities has tended to be low density, non-mixed-use development. Such development is intrinsically hard to serve with transit when compared to the denser core city, which generates many more trips per mile of service.

This means that the end of cheap oil is bound to have a major impact on U.S. land use, and its habitation potential. (See "The End of Suburbia.") Whereas poverty was previously concentrated in the core city while the suburbs were more affluent, the suburbs have now gotten poorer; most poverty is now in the suburbs.

In some areas, there are entire suburban neighborhoods full of abandoned homes. Many of the newer jobs have also moved out toward the suburbs. This means that getting to work increasingly requires commuting between suburbs to get from home to work, a type of travel which transit, by its nature, is ill-suited to handle very effectively.

Transit to the rescue? Yes, but not very fast, since it has been lacking significant new investment in recent decades. U.S. transit ridership peaked in 2008 and has since recovered modestly -- but it has still not yet reached this previous peak.

Looking at the graph to the left at this link, it appears that the poor economy largely led to the 2009 ridership decline, while increasing fuel prices are now helping to lead to a modest U.S. transit rider recovery. 2011 transit ridership is now up about 2.3% over 2010. However in some areas harder hit by high gas prices and and a poor economy -- like San Diego -- transit use is up a lot more.

The trend of mass transit growing more and more "in" with the public can be seen all over the country. The American Public Transportation Association reports that Americans took 10.4 billion public transportation trips in 2011, the second-highest total since 1957. That figure is bettered only by 2008's total, when gas prices soared to over $4 a gallon.

Transit faces several challenges, including a class-image problem, with so much U.S. suburban development being car-addictive by nature. In urban areas, those who use transit -- and who are willing to trade the convenience of driving for the time savings benefit of public transit -- are often identified as being among the poor. This often makes transit a hard sell politically.

The other problem is that transit -- like roads -- is unprofitable and requires a lot of public money up-front, especially for rail. Government money is increasingly in short supply these days. By the time the politics swings in favor of transit, as a result of peak oil and soaring fuel prices, transit might well be unaffordable.

Those left stranded in the suburbs can try to carpool, telecommute, combine or eliminate trips, or drive slower to save on gas. If all else fails, they can move to less gasoline-intensive locations. By last year a distinct home-buyer avoidance of suburbs with long commutes could be seen.

The other transportation option that appears to hold promise for preserving the habits of suburban commuters, struggling on a limited budget to drive, would appear to be the widespread acceptance of smaller personal vehicles like bicycles, electric bikes, motorbikes, and motorcycles, especially for commuting -- and despite the risks that come with their use. There is good evidence that public support for downsized travel alternatives is steadily increasing, even electric motorcycles.

However, most suburban highways are not designed to safely accommodate slower or smaller vehicles. For example, TxDOT builds wide shoulders on its high-speed highways, supposedly for the benefit of bikes -- despite the fact that the large speed differential makes bikes sharing lanes with cars unsafe when the cars are going more than 30 MPH. The evidence indicates that many drivers try to shift to motorcycles to save on fuel costs with sometimes deadly results.

Our findings suggest that people increasingly rely on motorcycles to reduce their fuel costs in response to rising gasoline prices. We estimate that use of motorcycles and scooters instead of 4-wheeled vehicles results in over 1,500 additional motorcycle fatalities annually for each dollar increase in gas prices. Motorcycle safety should receive more attention as a leading public health issue.

[Roger Baker is a long time transportation-oriented environmental activist, an amateur energy-oriented economist, an amateur scientist and science writer, and a founding member of and an advisor to the Association for the Study of Peak Oil-USA. He is active in the Green Party and the ACLU, and is a director of the Save Our Springs Association and the Save Barton Creek Association in Austin. Mostly he enjoys being an irreverent policy wonk and writing irreverent wonkish articles for The Rag Blog. Read more articles by Roger Baker on The Rag Blog.]

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Mike Davis : Protest in the Driver's Seat

Image from the Schumin Web.
Chevy to the levee:
Protest in the driver's seat

This is the ultimate American way: protesting in a car (or on a bike) while obeying the law. The possibilities for serene family tourism are endless and mind-boggling.

By Mike Davis / The Rag Blog / November 23, 2011

The sickening repercussion of hardwood against a protestor’s skull is the soundtrack to too much of American history.

If you think being a heavyweight boxer or an NFL wide receiver is an invitation to brain damage, try being an anti-capitalist.

Especially when you face an unholy alliance of arrogant bankers, sneering stockbrokers, and "liberal" Democratic mayors, as in L.A., Portland, Seattle, and Atlanta. Or when your civil liberties exist purely at the sufferance of a billionaire municipal autocrat with Louis XIV tendencies like Bloomberg.

Few events in a young activist’s life are as memorably disturbing as the first time you look into cop’s eyes a few anxious inches from your face and find only robotic murderous hatred staring back at you.

In my day this dehumanizing fury had usually been programmed somewhere in Vietnam’s Central Highlands or Mekong Delta. Today it was likely implanted in a place called Fallujah or Kandahar.

No doubt it is an important rite of passage to a fuller humanity to become, at least for a few terrifying moments, just another body to be beaten.

But -- ouch -- I’m not very brave and don’t like being clubbed, pummeled, tightly handcuffed, or dragged by my hair (one reason, I suppose, why I’ve always worn a crew cut).

I prefer to lock myself safely in my car and drive to protest, carefully obeying speed limits and traffic signs. Perhaps humming a crackled version of "drove my Chevy to the levee" or singing a few rousing verses from "O, Canada."

Indeed it was Canadian autoworkers during a brutal Ford strike in fall 1945 who first turned the class struggle into a drive-in.

At the end of World War II, the Ford complex in Windsor, Ontario, was the largest factory in Canada (about 15,000 workers) and Ford management counted on provincial Tories to break the strike with unprecedented police violence.

After days of being harassed by Ontario cops and less-than–heroic Mounties (actually Canada’s FBI), the autoworkers borrowed an idea from an earlier UAW protest in Detroit and simply parked 2,000 family Fords around the Ford plant.

The Tories’ only answer to the great auto blockade was a briefly-mulled-over plan to use army tanks to crash through the strikers’ cars. An armored regiment was put on alert. Then Ford and their political allies blinked.

Good idea?

Darn right.

Independent owner-operator truckers have used the same tactic on numerous occasions in the last 40 years, beginning with the oil price crisis in the 1970s.

They’ve shut down interstates and blockaded city halls, while their sound systems blasted out "Convoy," C. W. McCall’s great anthem of 18-wheel rebellion.

‘Cause we got a great big convoy rockin’ thru the night,
yeah, we got a great big convoy, ain’t she a beautiful sight?
Come on and join our convoy, ain’t nothin’ gonna get in our way.
We gonna roll this truckin’ convoy ‘cross the USA

No need, of course, to use Fords. As Dinah Shore used to sing, "See the USA in Your Chevrolet" -- or a Toyota, VW, a slope-nosed Kenworth "Anteater," or, more correctly, your Schwinn retro-city bike. Just keep the convoy rollin’.

Indeed, the next stage of protest could be considered a nostalgic analogy to an old-fashioned family Sunday drive.

Cruise slowly by the Stock Exchange ("Look, kids, here’s where the dudes who stole our house work") or keep circling and ogling your local police headquarters ("Awesome architecture -- let’s stop and wave").

Or, best of all, "That’s Lloyd Bankfein’s home. Now whatyathinkofthat?"

“He’s president of Goldman Sachs. He got paid $58 million in 2007, so he must really work harder than anyone else on earth.”

"Let's honk the horn and say howdy to good ole Lloyd."

Remember, safety first, so don’t drive like that little old lady from Pasadena.

Stay at the exact speed limit, or, better, at the legal minimum. Always set a good example for the 2,000 similarly inclined leisure drivers behind you. They may also want to slow down and sightsee.

This is the ultimate American way: protesting in a car (or on a bike) while obeying the law. The possibilities for serene family tourism are endless and mind-boggling.

Wow, perhaps even apocalyptic.

But, out of respect to Bill McKibben and the anti-global warming movement, please carpool to shut down Wall Street.

[Mike Davis is a Distinguished Professor in the Department of Creative Writing at the University of California, Riverside. An urban theorist, historian, and social activist, Davis is the author of City of Quartz: Excavating the Future in Los Angeles and In Praise of Barbarians: Essays against Empire. Read more articles by Mike Davis on The Rag Blog.]

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Roger Baker : The Texas Road Lobby Meets Peak Oil

Photo by Rupert Ganzer / Flickr.
Coming soon:
Peak oil, peak driving, peak cars

Part IV: The Texas road lobby meets peak oil

By Roger Baker / The Rag Blog / July 28, 2011

[This is the fourth and final part of a series by Roger Baker on transportation, centering on the issue of peak oil and its ramifications.]

The 'Pentagon of Texas'

Molly Ivins once called TxDOT (Texas Department of Transportation) the "Pentagon of Texas.” The political clout of TxDOT and the Texas road lobby operating on the state level is still unrivaled.

Inside Texas, TxDOT has held a politically powerful position for many decades, with the help of its traditional political allies like the Texas Good Roads Transportation Association, which was the political base for businesses and civic clubs that might benefit from local application of road money, and the Associated General Contractors, essentially an alliance of private road contracting companies, rather analogous to the defense industry. The contractors gained their institutional power decades ago, when TxDOT stopped building very many roads on its own.

From its earliest days, the Texas Highway Commission, as it was known before it became TxDOT, has been a highly political institution ready to pass out favors to its political allies in the form of road contracts. This snip is taken from an especially scholarly study devoted to the early politics of TxDOT.

It’s more than likely that the conditions of these highways can be seen as a direct legacy of years of county authority and political struggle for control of the department. After all, since its founding in 1917 the Texas Highway Department has, as often as not, been forced to make decisions based on political considerations. Issues such as traffic density and the proportional allocation of funds were often secondary to the job of protecting revenue or just getting roads built.

In Texas, roads gradually became seen as a traditional form of publicly funded entitlement; a kind of welfare to subsidize suburban sprawl development in a heavily urbanized and rapidly growing state.

The way politics works in Texas, there is a traditional alternative to political bribes. Instead, the special interests channel money to Texas politicians through campaign contributions. Quite in line with this approach, the biggest road contractors in Texas contributed over $1 million to Texas Gov. Rick Perry during his first term in office. Later they gave more millions to other Texas politicians.

Since the state solicited its first bids for a leg of the TTC project in 2003, private companies that have landed lucrative TTC contracts have contributed $3.4 million to Texas candidates and political committees -- a significant increase in their political activity. TTC contractors also have spent up to $6.1 million on Texas lobbyists since the state solicited their respective bids. While the TTC contains windfalls for some contractors, lobbyists and elected officials, the benefits to Texas motorists and taxpayers are much less clear.

A few years ago, when the late Ric Williamson chaired the Texas Transportation Commission, it became apparent that fuel tax revenues could not possibly keep up with TxDOT's accustomed pace of road building. Working with Gov. Rick Perry, Williamson ordered TxDOT to try to shift all its new construction to "public-private partnership" toll roads to leverage TxDOT's limited public funds.

In order to sell private investors on toll road bonds, it is obviously helpful to try to maintain that road demand will keep increasing for decades until the bonds are finally paid off (some toll road bonds, like some issued for US 290 E, pay junk bond rates, but are uninsured against default). The policy is to try to use private toll road bond funding and also federal loans to supplement TxDOT's traditional but stagnant gas tax revenue, in order to bridge the revenue gap and keep building roads.

As is the case with Indiana Gov. Mitch Daniels, Texas governor Rick Perry is a highway booster. "The highways of Texas are built and paved in part by paths of gold leading to the Texas Governor's Mansion," political reporter R.G. Ratcliffe wrote in the Aug. 30, 2002, edition of the Houston Chronicle, in “Highway plans bring money to politicians.”

The political clout of the Texas road lobby still exceeds that of the various competing social needs such as education. TxDOT's long range road planning policy still stubbornly reflects the same outlook, which involves working hard to perpetuate the notion of ever-expanding growth in future road demand.

However, as the federal data clearly shows, Texas travel is currently falling short of TxDOT's vehicle travel growth projections, due to a combination of higher fuel prices, a poor economy, an aging population, congestion fatigue, and changing driving behavior, also seen nationally.


The Texas road lobby today

The latest incarnation of the Texas road lobby is arguably Transportation Advocates of Texas (TAoT). A sort of who's who of current Texas road politics, clearly organized by special interest money. Scroll down to the bottom to see a long list of those interests currently involved in promoting roads -- largely banking, construction, engineering, road contracting, and land development interests.

Those familiar with Austin's federally sanctioned Metropolitan Planning Organization, CAMPO, will see the last two CAMPO directors, Mike Aulick and Joe Cantalupo, listed among members of the road lobby's supporters.

This snip from an internal document of this same group, TAoT, recently circulated to its supporters, clearly shows that their primary political goal is to get more road money, despite the relatively falling gas tax revenue:

The Great Outstanding Issue: Texas has yet to identify a stable source of additional revenue that can meet the transportation needs of a rapidly expanding population. Fuel efficiency and hybrid vehicles reduce gas tax revenue -- and the state fuel tax hasn’t changed in 20 years. Whether it is through taxes, fees, tolls or other sources of revenue, further delays in providing additional financing will inevitably result in more traffic congestion.

By one estimate we under-fund roads by $8 billion a year. The problem will only get worse. Congestion will get worse. Economic losses will get worse. Rural connectivity will get worse. Road conditions and road safety will get worse. And the cost associated with doing nothing means one day the price tag will be worse.

Only roads are mentioned; TxDOT and the road lobby don't do much transit, except by TxDOT passing federal transit funds down to the local level. Even while admitting that the road funding situation is getting worse with no relief in sight, the focus remains strongly on building roads, as spelled out in this editorial by two top TAoT road lobbyists.

But we are not without solutions. The gas tax hasn't been increased in 20 years -- and its buying power has significantly diminished due to inflation. Vehicle registration fees could be raised and dedicated to high-priority projects. Allowing local officials to access a portion of the gas tax or other sources of revenue would also provide relief. And we can support ending the diversion of highway dollars to spending on other priorities.

The Texas road lobby selects data that
always predicts increasing road travel demand

The Texas road lobby seeks to keep building roads which benefit not only the road contractors, but also the powerful Texas suburban land developers who thrive by planning ever-expanding rings of suburban sprawl around the major metropolitan areas of Texas, a pattern typical of other sunbelt states.

By 2005, about 86% of the Texas population was living in its urbanized areas with only 14% living in the rural areas. Suburban sprawl development has long been made profitable by buying and developing land in the suburban fringe areas. These areas often escape city taxes, but require the help of publicly funded highways to help stimulate development.

This road-assisted urban development formula worked for decades, but it is based on unsustainable trends. Anyone can now see from the federal data that the total travel demand on Texas roads has been flat since about 2007. Here are the yearly VMT numbers for total travel in Texas in millions of miles on state's roads as measured by the Federal Highway Administration. See for example the 2007 link.

2004 -- 231,008
2005 -- 235,170
2006 -- 238,256
2007 -- 243,443
2008 -- 235,382
2009 -- 230,411

Unfortunately, this useful yearly data series for Texas road travel stopped in 2009. However, using this series we can compare the five most recent Februarys of Texas driving; here again, we can see that the Texas VMT road travel data have continued to stagnate or decrease, on through the most recently reported data:

Feb. 2007 -- 17,893
Feb. 2008 -- 18,831
Feb. 2009 -- 18,953
Feb. 2010 -- 18,490
Feb. 2011 -- 17,635

Given the nature of road politics in Texas, it comes as no surprise that TxDOT's long range plan released in May 2010 anticipates a travel demand growth of about 2.44% a year, for decades into the future, as a basis for TxDOT planning. As TxDOT says, "The new Statewide Long-Range Transportation Plan 2035 (SLRTP) will serve as the state's 24-year "blueprint" for the planning process.

TxDOT's "Statewide Long-Range Transportation Plan 2035," released in mid-2010, tries to ignore the current flatness in travel demand as something exceptional and abnormal. It assumes that vehicle miles traveled will somehow recover and then continue to rise steadily as a straight line for decades to come, much as it did before 2005.

The TxDOT long range planners are unable to explain the sharp falloff in traffic volume seen to begin about 2005 -- with Texas road travel peaking in 2007 -- and now continuing through the most recent data in 2011, or about six years now.

Since the Texas travel data is collected and published by the Federal Highway Administration, the continuing stagnation or decline in vehicle miles traveled on Texas roads is hard for TxDOT to deny. This well-documented reality has caused TxDOT to insert the strange flattened VMT section in the middle of their otherwise ever-ascending long range travel demand chart.



The reality is also that car registrations in Texas peaked in 2005 and then flattened and decreased slightly until 2009, where the most recent FHWA data ends. This data is given in thousands of car (light vehicle) registrations in Texas, 2004-2009, here seen peaking in 2005:

2004 -- 8,620
2005 -- 8,793
2006 -- 8,689
2007 -- 8,680
2008 -- 8,711
2009 -- 8,711


The Texas Road Lobby's think tank,
the Texas Transportation Institute (TTI)

The Texas road lobby has its own nationally prominent think tank, the Texas Transportation Institute (TTI) based at Texas A&M. TTI functions more or less as an academic wing of the road lobby, implicitly denying peak oil, while focusing primarily on expanding road capacity as the best way to preserve mobility and serve future transportation needs. The TTI outlook on urban traffic congestion and congestion relief -- through building more roads for ever more vehicles -- is widely disseminated through the media as their main approach to transportation planning policy.

Over the past year, TTI experts answered tough questions on a variety of state and national transportation issues. Over 2,500 newspaper articles, broadcast television spots and professional journals -- with a potential reach of over 725 million readers and viewers nationwide -- mentioned the Institute or its experts.

For the Texas road lobby to contemplate that the total amount of driving inside the USA may never again exceed the peak reached in 2007, either in Texas or nationally, is considered a heresy.

As the charts show, the TTI and TxDOT claim to be able to predict the future numbers of drivers, and the future road demand, thus implying the need to keep expanding road capacity for decades into the future. (Note: car ownership peaked worldwide in 2004.)

The TTI works hard to help us ignore the fact that people are actually driving less, in large part because of higher fuel costs combined with a decreasing family budget. Other factors include an increasing level of rush hour congestion seen in most large U.S. cities as a normal consequence of their growing population.

At the same time, TTI concludes that Texans will always be willing and able to keep driving more, as they have in the past, by means of a transition to more fuel efficient or electric vehicles. This would of course justify the continued building of ever more new roads by the private road contractors.

Since fuel tax revenue has been stagnant compared to the rate of inflation, TxDOT's gas tax revenue has effectively been decreasing. From the standpoint of road lobby politics, the political path of least resistance is for the road lobby to try to claim that demand for new road capacity will always keep growing as fast as it has in the past.

The road lobby also has an interest in trying to maintain that the increasing fuel efficiency of vehicles is more important than changing driving behavior, thus causing fuel taxes to continue falling short of the funding needed to meet the projected increase in road demand.

In May 2010 Dr David Ellis of TTI appeared before a joint meeting of two top transportation-related committees of the Texas Senate to explain why Texas travel volume will always keep rising, much as it did before 2005. And to argue that future road demand will continue to increase rapidly for decades to come, which implies the need for ever more roads.

Note the similarity between Dr. Ellis's chart and TxDOT's VMT charts released about the same time, except in the case of Dr. Ellis's chart, driving demand is projected to increase even more steadily over time.



Dr. Ellis's argument is that while Texas may have seen slight decreases in driving before, that these are exceptional and momentary blips, after which the old historic, and presumably normal, increases in vehicles on the road will resume, blind to the rising price of fuel.

The steady increase in driving seen during the decades of cheap oil before 2005 should thus be accepted as the normal situation, and as a proper guide to future spending on roads in Texas (see Exhibit 2 of his report).

Part of Dr. Ellis's conclusion is based on the theory that vehicle fuel efficiency is increasing much faster than probably is the case. While it is true that the U.S. has been using a lot less petroleum since 2007, this is probably in large part due to the fact that the public driving is less.


The reality is that while average vehicle fuel efficiency is really increasing, it is only happening very slowly. It takes about 10 years for fuel efficiency to increase by 5%, or .5% per year, largely held back by a slow vehicle replacement rate, as Stuart Staniford shows in this chart.

In sharp contrast to this probable rate of vehicle efficiency increase, Dr. Ellis estimates in his chart that vehicle fuel efficiency in Texas has somehow increased from 17.2 MPG in 2005 to 20.5 MPG in 2009 (see Exhibit 4 of his report). This would be a whopping 19% vehicle fuel efficiency increase in just over four years. This is nearly 5% a year, or almost 10 times the much more plausible rate of .5% a year seen above.

Exaggerating the probable increase in fuel efficiency helps the road lobby ignore the current and ongoing stagnation in vehicle miles of travel since the 2007 peak, both in Texas and the USA. The theory seems to be that any time now we will dump our old cars and go out and buy new electric cars, which the road lobby will tax per mile with road user fees. Meanwhile, we are expected to keep driving more and more, just as we did in past decades of cheap oil.


Texas roads are already deteriorating on a large scale

With the Texas road lobby in effective political control of state funding, most of the available road money has been going into building new roads. As they say, there are no ribbon-cutting ceremonies for maintaining existing roads, which in Texas have been deteriorating. As this piece points out, Texas road upkeep is getting lot more expensive, so repairs are falling behind to the point that most Texas roads are in now less than good condition.

Texas’ road conditions

As of 2008, a full 65% of Texas’ state-owned major roads had fallen out of good condition, meaning they will now be increasingly expensive to repair and maintain. Only 34% of Texas’ roads were in good condition, the state in which repairs are least expensive. The condition of 1% of Texas’ state roads was not reported.

Texas’ highway spending priorities

Between 2004 and 2008, Texas spent 62% of its highway capital expenditures on road expansion – $4.1 billion each year on average -- but only 11% on repair and maintenance of existing roads -- $692 million. That 62% of spending on expansion added 2,962 lane-miles to the Texas road network.

Texas would need to spend $4.5 billion annually for the next 20 years to get the current backlog of poor-condition major roads into a state of good repair and maintain all state-owned roads in good condition. Shifting more funds toward repair would go a long way toward addressing the state’s maintenance needs.

Cartoon from Korea Times.
The Texas road lobby's funding solution:
the Mileage-Based User Fee (MBUF)

Given the TTI's faith in the need to build more roads to accommodate an ever-increasing level of road demand, combined with an increasing inability of the fuel tax to meet the funding gap, it is easy to conclude that a lot more road funding revenue will be needed.

Anything to avoid seriously dealing with the basic need to shift transportation policy toward more energy-efficient compact urban development sometimes called smart growth, together with a new focus on public transportation.

The road lobby's basic conclusion is that Texas now needs to move toward some kind of vehicle mileage tax or fee, and raise a lot more money per vehicle mile driven. However any kind of new tax or fee that extracts more total money from already financially stressed drivers is going to be widely unpopular. Since the word "tax" is already quite unpopular in Texas, other terms are being used such -- as a "Mileage-Based User Fee." Alternative terms being used are "road user charges" or "network tolls."

A new tax or fee on miles driven is seen as one of the few possible ways to raise enough new money to keep the road-building game going. However this method of funding expanded road capacity ignores the effect that rising fuel prices are having by already reducing total per capita driving. It is becoming a matter of what the driver market will bear, given that driving is now in decline both nationally and in Texas due to the rising cost of fuel on top of a stagnant economy. But TTI sees little alternative.

TTI Leads Mileage-Based User Fee Conference, June 20, 2011

Some 115 federal, state and local government representatives, transportation system users, private-sector representatives, and transportation researchers attended the Symposium on Mileage-Based User Fees (MBUF) in Colorado, June 13-14. That represents a 60 percent increase over last year’s attendance.

MBUFs, also known as vehicle miles traveled (VMT) fees, would raise funds based on how many miles a motorist drives. Revenue generated would replace or supplement the inadequate fuel tax, which comes from each gallon of gas sold at the fuel pump.

“Although the idea of a road-user fee to replace or supplement the fuel tax has been discussed and researched at varying degrees for about a decade now, interest is really growing at the state and national levels,” says symposium co-chair Ginger Goodin, of the Texas Transportation Institute (TTI). Goodin is currently serving as principal investigator for a USDOT study on road-user fee collection technologies and is TTI’s resident expert on the topic.

The Texas Transportation Commission (TTC), at its Dec. 15, 2010 meeting, took a look at a variety of road user fees in a presentation given by TTI.

The Texas Transportation Institute reviewed its draft report, "Is Texas Ready For Mileage Fees?" which asserted that fuel consumption will continue to decrease and make a gas tax an unsustainable revenue generation method in the upcoming decade.

This fact -- combined with increasingly fuel-efficient and alternative-fuel vehicles and the $315 billion in funding needs for Texas transportation identified by the Texas 2030 Committee -- demonstrates the inadequacy of the fuel tax as a viable long-term funding mechanism for maintaining and expanding highways in the Lone Star State,

the report read.

The Legislature required Transportation Commissioners to take a look at the viability of a Vehicle Miles-Traveled (VMT) tax, which would rely on either on-board devices or remote-tracking systems to measure the number of miles each registered vehicle travels, and then tax vehicle owners accordingly. No formal action was taken.

As a part of their background preparation for the TTC, TTI had set up a number of focus groups with average citizens to try to anticipate public reaction to road user fees. As the reader may easily imagine, new road user fees proved to be quite unpopular -- "negative reaction to mileage fees heard raised were pretty consistent across the focus groups"

Even though different focus groups in different areas all had these concerns (privacy, cost, and enforcement), in some groups privacy was more prevalent and in other groups it was cost.


Where is the Texas road funding deficit headed from here?

Given the current political climate and budget constraints, the chances of the Texas road lobby actually implementing the proposed mileage taxes or fees seems highly unlikely. This is simply because the amount of new revenue thought to be necessary would require the imposition of much higher user or driver fees than are now being collected through the current Texas gas tax. This totals about 40 cents a gallon, -- about half state and half federal.

However, the federal portion of this funding is in trouble since the feds have long been spending beyond their means. It appears that federal road funding must now shrink dramatically.

The Highway Trust Fund, based as it is on gas tax revenues, is the main revenue source for state and local transportation funding, special programs, and MPO planning funds. The gas taxes bring in about $35 billion annually, explained Beaudry, but the feds have been spending about $27 billion more than that, drawing upon revenues from other sources.

The crux of the Congressional debate swirls around “House Rule 21,” which says they can’t spend more than they bring in (in gas taxes), which means cutting more than a third of the transportation bill. There is disagreement over three options -- raise the gas tax, dramatically cut spending or find new revenue sources.

In essence, a new and less costly approach to maintaining urban mobility than road-building-as-usual is needed pretty soon. The economics of driving is likely to play out this way: we will probably see much higher oil prices by next year, with $4.50 a gallon gasoline now anticipated.

Goldman-Sachs, Morgan Stanley, and Barron’s issued reports last week forecasting that oil prices will be much higher next year because of a stagnant supply situation. Goldman is saying the Saudis do not have nearly as much reserve capacity as Riyadh and the IEA claim and forecast oil at $140 a barrel next year. Barron’s is talking about oil reaching $150 next spring with spikes to $160 and $170 a barrel. Gasoline will be in the vicinity of $4.50 a gallon.

Just try to imagine the political challenge of the road lobby trying to impose miles driven fees on top of these fuel prices! But even this situation will probably not be enough to break through the current public denial relating to the unsustainability of driving as we have in the past.

To really break through our denial it may take $10 a gallon gasoline, as prominent peak oil policy analyst Tom Whipple has recently speculated:

Even weeks of 100 degree temperatures or even $4, $5, or $6 gasoline is unlikely to shift many prejudices in the short term. It is going to take a more severe shock -- say food shortages or $10 plus gasoline -- to shake the notion that a return to life as we knew it is still possible.

[Roger Baker is a long time transportation-oriented environmental activist, an amateur energy-oriented economist, an amateur scientist and science writer, and a founding member of and an advisor to the Association for the Study of Peak Oil-USA. He is active in the Green Party and the ACLU, and is a director of the Save Our Springs Association and the Save Barton Creek Association in Austin. Mostly he enjoys being an irreverent policy wonk and writing irreverent wonkish articles for The Rag Blog. Read more articles by Roger Baker on The Rag Blog.]

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