Economic adjustments to gas price increases
This morning I read an article on Yahoo Finance by Charles Wheelan, who authored the book “The Naked Economist.” The article was titled “High Fuel Costs Could Spur a New Rationalism.”
In summary the article basically says that people will make economic decisions based on how prices affect them. Right now the price of gasoline is the primary driver to consumer’s economic choices. He says that as the price of gas continues to rise consumers will no longer find it rational to commute long distances to work because the cost to them is so great. Wheelan predicts that as the cost of gas rises consumers will be forced to make economic decisions about where to live, work and how to commute.
Wheelan suggests four changes that could possibly be made in order to cut one’s energy spending.
- Move into a smaller house. Having a large house out in the country may be nice, but energy prices will soon have you feeling not so happy about your grand palace. When you consider the costs associated with heating and cooling your home as well as the gas driving to and from work you might start to see your energy bill skyrocket.
- Businesses may make smarter location choices. Although city commercial space is pricey, a firm will have a better chance of attracting quality employees if they are located in a central locale. “Suppose you’re considering two jobs: One is in a building three blocks from the commuter train station, and the other is in an office complex 21 miles away from anything except cornfields. How is that decision affected by $6 gas?”
- People may start moving back to the cities. Many people often consider cities to be polluted and dangerous places, but the opposite is starting to become more true. “Both Chicago and New York City had the fewest number of homicides in 2007 than in any year since the mid-1960s.” Cities also tend to have more options when it comes to entertainments as well. They tend to have more sports teams and performing arts centers to name a few. They also tend to have more universities located nearby as well. Downtown Seattle has three major universities to choose from. Larger cities would likely have even more options.
Although I currently live inside the city limits of Seattle, I will take all of these factors into consideration when my lease comes due here at the end of August. Since I use transit to get to work, the cost of driving to downtown isn’t really a factor, but instead the cost of getting to transit is more of a concern. Here is what I will be considering when I move.
- Cost of the rental unit
- Size of the rental unit
- Distance to nearest reliable bus
- Distance to girlfriend’s place
- Parking availability
- Time it takes to get to work from the rental unit
After considering all these factors, I might end up choosing a place that costs a little bit more in rent because the cheapness of another unit could be outweighed by the cost of gas to travel from one place to the next. I would also pay a premium to be close to a reliable and quick bus.