Sorry, Adam, but the decision making process is more interesting than the policy.

“This ‘inelasticity’ in our demand for oil makes a tax a pretty inefficient way to help us use less of the stuff.”

Greens are thinking about us and our behaviour. Some Greens.

“At a time when most people haven’t had a pay rise in years, this is particularly tough. ”

Hmm.

http://www.statistics.gov.uk/cci/nugget.asp?id=10

Why spoil your article by making something up right at the beginning? I am sure some people have not had a wage rise but to say most is clearly untrue. One could say if their nominal wage rise was outpaced by inflation it is a real wage cut. However, most people when they speak about wage rises mean nominal.

I disagree with you that high fuel prices is an inefficient way to change behaviour. It is true that the demand for fuel is inelastic. Someone who needs to drive 50 miles to work continues to drive 50 miles in the face of high prices and spends less on other things. However, that is only true in the short-run. In the long-run, they get a job nearer to home, move nearer to where they work, switch to public transport or get a more fuel efficient vehicle. Casual journeys are curtailed and industry innovates to be more fuel efficient. So in the long-run fuel demand gets more elastic and the high prices is demand destructive. That is what happened in the 1970s when prices quadrupled. The industrial sector became much more efficient and consumers switched to smaller engines.

Whatever way you want to argue this (I expect making poor people reliant on underfunded public transport is probably not an issue for middle class policy wonks who can spend a grand on a bicycle and live near to work). I assume you all recognise that rural communities need cheaper fuel and subsidised car pooling (as they have to drive greater distances and effective public transport over dispersed low density areas is often impractical) so they can continue making the food that stops everyone else from starving to death. I mean, you do all like eating yeah?

Richard – as that graph says, earnings went up by 1.8%, at a time when RPI was running at around 5%: http://www.statistics.gov.uk/cci/nugget.asp?id=19

If long term behaviours change, then why didn’t they significantly thoughout the whole of the 1990s? Or does it take more than a decade?

@ 2 Richard

“I disagree with you that high fuel prices is an inefficient way to change behaviour. It is true that the demand for fuel is inelastic. Someone who needs to drive 50 miles to work continues to drive 50 miles in the face of high prices and spends less on other things. However, that is only true in the short-run. In the long-run, they get a job nearer to home, move nearer to where they work, switch to public transport or get a more fuel efficient vehicle.”

Hmm. I have no qualms about raising fuel taxes in principle, but I think (as the article suggests) it’s important to develop a working alternative infrastructure first instead of just making things difficult for people now, then hoping that public transport will catch up.

I grew up in a smallish village where the buses ran once and hour, stopping at around 7pm (and none on Sundays), and the nearest train station was about a three-mile walk. Punitive petrol prices would have made it very hard for many of the people who lived there, myself included, to go about their daily business. Whereas if the buses had come every twenty minutes and run till midnight, I’d probably have never bothered learning to drive at all.

Translating this over to industry, pushing up petrol prices without due care and attention could put many shops and distribution firms out of business.

@chalse guevara – yup, that’s exactly my point. Read the longer original and I spell it out more clearly…

. Adam Ramsay

” Richard – as that graph says, earnings went up by 1.8%, at a time when RPI was running at around 5%: http://www.statistics.gov.uk/cci/nugget.asp?id=19 ”

The point I was making was that wages are still rising. Different people have different personal inflation rates. If someone has a personal inflation rate of 5% and a nominal wage rise of 1.8%, yes that is a real wage cut. However, that need not mean they are actually worse off. If they are paying 25% + less on their mortgage compared to 2008 that would need to be factored into their personal inflation rate. Moreover, in the long-run money is neutral, so inflation does not actually make people worse off despite money illusion deceiving them into believing it does.

” If long term behaviours change, then why didn’t they significantly thoughout the whole of the 1990s? Or does it take more than a decade? ”

Because the real price of oil was low. Remember the nominal price is irrelevant, what matters for behaviour changing dynamics for households and firms is how much income and revenue are being consumed by fuel.

5. Chaise Guevara

I have no problems with spending on a comprehensive transport network. Moreover, rural services will always need some degree of subsidy. Unfortunately rural living is always going to be more expensive than urban. Although, there are other non-monetary benefits and that is why people endure the higher monetary costs.

There really is no easy way to get people to transition from dependency on oil to other forms of energy. High oil prices are not going away and something of a supply crunch is coming between 2012-14, which will push the price up even further.

The government have a role here to take the lead. Consumers are reluctant to switch to alternative energy cars because there is not the refueling infrastructure in place. The private sector are reluctant to build the infrastructure in case there is not the demand. Even if the whole country switched to electric cars we do not have the electric generating capacity. So we have problems to solve but they are not insurmountable with a bit of joined up thinking. Things will not be easy but high fuel prices are needed to push things in the right direction.

8. Richard W – “Moreover, rural services will always need some degree of subsidy. Unfortunately rural living is always going to be more expensive than urban. Although, there are other non-monetary benefits and that is why people endure the higher monetary costs.”

I don’t see why rural services need a subsidy. Rural living is not more expensive than urban. Housing prices are usually cheaper for one thing. The problem is that rural dwellers tend to be either very rich or very poor. The poor need the bus services, but the rich do not. They have cars. To subsidise the former is wrong and yet it is hard to work out how to subsidise the latter alone.

“There really is no easy way to get people to transition from dependency on oil to other forms of energy. High oil prices are not going away and something of a supply crunch is coming between 2012-14, which will push the price up even further.”

Well it seems there is an obvious easy solution – do nothing and wait. Oil will start to run out, prices will go up and people will change.

“The government have a role here to take the lead. Consumers are reluctant to switch to alternative energy cars because there is not the refueling infrastructure in place. The private sector are reluctant to build the infrastructure in case there is not the demand.”

I am not sure it is the Government’s role to lead here. Why? People will switch over time. In the meantime, if we do nothing, we avoid the risk of picking the wrong technology and so damaging the national economy.

I assume you all recognise that rural communities need cheaper fuel and subsidised car pooling (as they have to drive greater distances and effective public transport over dispersed low density areas is often impractical) so they can continue making the food that stops everyone else from starving to death.

I certainly don’t.

People who live in rural communities choose to do so, because they value the green spaces, lower population density, lower pollution, etc of the countryside more than they value the convenience and the job opportunities of the city. They’ve made that choice despite the fact that fuel is relatively expensive. If it isn’t working out for them, they can always sell up and move to a flat in Leytonstone.

And food is a complete red herring. 1.6% of the labour force works in agriculture, making up 0.6% of GNP (i.e. they’re just over one-third as productive as the average worker). So most people who live in the countryside aren’t making food anyway, and we’d be better off if the ones who do make food stopped and did something more productive (we could then buy food from places where agriculture is more cost-effective, such as Canada, New Zealand and Australia).

Richard, I’d agree with your argument that prices can change elasticity over time. However, I don’t think prices are a particularly effective way of doing so in the absence of the kind of green new deal interventions that the article advocates. Elasticity can be increased by reducing the need for people to use cars and inefficient home energy sources, and I would argue that this would happen more quickly than waiting for people to change jobs or move home so that they drive less. Elasticity of demand is key here, since price mechanisms work better the more elasticity there is. Take for example tobacco duty. The argument for regular increases in tobacco duty is that they are to cut smoking, but given that tobacco duty is now well over 500%, such that 50g of tobacco is £4 in Belgium and £12 in the UK, people making that argument should be surprised that anyone in Britain still smokes. The reason of course is that nicotine is so addictive demand is very inelastic to price. Steps such as the smoking ban are more effective in changing people’s behaviour, while the availability of cessation aids is a direct attempt to change the elasticity of demand for smoking, offering smokers an alternative choice in the context of rising prices. In the absence of such interventions though, analogous to the green new deal, increasing taxation on inelastic goods is just a very good way for governments to make money while pretending to be doing something constructive about a problem.

The idea that you would even try to ”wean” people off fuel use IN BRITAIN through just putting the price up to make it unaffordable (for the less well off) sucks so much it’s difficult not to feel scathing of people who propose it. People die of the cold in winter.
So you force people to turn their heating down and not get out so much. Maybe like I do and sit right next to the one radiator that is used in the house. Not have the immersion heater on, but just heat water on the stove when needing hot water for dishes and washing.
And this does what for the planet exactly? I think it’s more about green types (in this country) being self-righteous and haughty. It’s the same mentality that priced many working class football fans out of football – and the same one that is going to gouge people for ticket prices to watch the Olympics. There’s some Tory on the Andrew Marr show right now justifying it. ‘Rip off Britain’ is my opinion of it.

Once you get into the ideas of policy regarding Climate Change, it gets interesting.

For one thing, taxing the poor off the roads opens you up to the ‘its all a tax scam’. Irrespective of the rights and wrongs of that, I am pretty sure that hammering the poorer members of our society is not the way forward. If kicking the ribs out of those with little chioce worked for something like Climate Change, then we wouldn’t have a problem.

This is where the greens fall down, they appear to hate poor people to the extent that they could pass for Tories. Hurting people through taxation is apretty cruel way of doing anything and looking back, it appears to be the least effective.

The greens and those interested in green issues, really need to look at the bigger picture. We live, like it or not, in a car driven society. You need a car to get to decent jobs, ‘decent’ supermarkets etc. Simply taxing the poor out of cars is not going to change society. You need to fundimentally change society and then let people drive that change.

What we really need is to vastly improve public transport. No, not ‘tweak’ public transport, not ‘slightly’ improve public transport, but make it easier, cheaper and more relevant to people. I live within 8 miles of one of Scotland’s new towns. To get to the Town centre takes about 30 to 40 minutes via ‘public’ transport. Christ, I simply cannot survive without my car. If I were to rely on public transport to get to work, that would add an extra hour and a half to my commute. For a jounry that takes me 20 minutes in a car, you really think I need another 2 hours taken out of my day?

13. Jim – “For a jounry that takes me 20 minutes in a car, you really think I need another 2 hours taken out of my day?”

No one said saving the planet would be easy. Surely you would agree that sacrifices have to be made? And that it is worth it?

Assuming someone else asked you.

@13 – I saw my partner off at Manchester Airport this morning (admittedly it was rather early), which is approximately 30 miles away from our home in north Liverpool. It took four and a half hours to get home on the train.

I’m travelling from the third largest urban area in the UK to the seventh largest and yet it takes four and a half hours to go 30 miles? A disciplined athlete could run it with an hour to spare!

Meanwhile, it costs more to get a train to London than it does to fly to Athens.

The state of ‘public’ transport in this country is utterly abysmal and until a realistic alternative (to the car) is advanced, people will still be legitimately angry at obscene fuel duties and taxes.

Surely the first duty of a Democrat is to tell the truth ? Oil is running out, the cheap stuff has already peaked, prices will rise in the long run whatever we do.Once we get most people to accept that, then we can debate what we want from the choices left to us.
Politics in general has been very poor at accepting the facts.

I disagree with some aspects, on the basis that artificially subsidising fuel isn’t helpful for society or the market.

Its taxed heavily, sure, but it also has a ton of externalities.

As I’ve pointed out on twitter, without higher fuel prices there won’t be investment into technology to develop alternatives to petrol based cars.

And it makes little sense to keep subsidising a finite source until the subsidy becomes too much to bear.

There are plenty of examples of higher fuel prices stimulating investment in R&D to find alternatives

http://nyti.ms/fXykkw
http://nyti.ms/eoXt77
http://bit.ly/e6vG23
http://nyti.ms/euS2nw

Paul – yes, I am not saying that we should pretend that fuel isn’t getting more expensive, or that we should introduce a long term stabiliser to keep prices where they are now. But we shouldn’t pretend that we just need to ‘be honest’ and then everything will sort itself out. We need to deal with the problem as a whole.

Let’s see all government officials use public transport. Maybe not even for a very long time, just a couple of months or so.

Sunny – yes, I’m not saying that we should get rid of all tax on fuel. But the truth is that a price mechanism is a pretty clumsy way to ensure investment in new technology or infrastructure. In general, neo-liberalism is pretty bad at investing in these things. If we want them to happen, we should just invest in those technologies, not put fuel prices up and hope that the moarket will invest. The market is pretty short term-ist, and probably won’t.

Irrespective of the rights and wrongs of that, I am pretty sure that hammering the poorer members of our society is not the way forward.

Agree. All carbon-taxation should be revenue-neutral, with every penny raised dedicated to taking the working poor out of the tax net (specifically, by significantly raising the zero tax allowance, and offsetting the gains to mid- and high-income taxpayers by slightly raising the basic and higher tax rates).

You need a car to get to decent jobs, ‘decent’ supermarkets etc.

False. I didn’t get a driving license until I was 31, and held down a succession of well-paid managerial jobs throughout my 20s.

Greens don’t seem to realise that people on low incomes drive cars.

Sunny @ 17

Yes, you can say that high fuel prices pushes the technology for cleaner cars, but people down the income scale do not have access to those cars until they come onto the second hand market. A brand new car with low carbon footprint and good MPG bought on Monday morning will not really have any impact on Climate Change or fuel poverty because the car it replaces will still be on the market and will end up increasing supply of higher emission cars by one. I have NEVER been an advocate of ‘improving’ cars and buying a Prius (or should that be a ‘Pious’?) because all it does is move the problem further down the line.

At the end of the day, it is not about each of us changing a little bit. Hydrocarbons are a central part of our life and simply switching off lights is not going to make a huge difference one way or another. What we need is a fundamental rethink of how our society runs.

We do not need to tax huge 4 x 4 off the road; we simply need to ban them off the road. We need to make it illegal for Newcars, vans etc to have bigger engines. Say 2.5 litre engines (for the sake of the argument) and then announce you are going to make the rest of them illegal anyway within ten years. Another thing we could try is having car free zones within town centres, replacing open roads with purely bus lanes and tramways. This will force ‘everyone’ onto public transport and give everyone a vested interested in improving it.

Right now the only people who regularly use public transport are those who have little, or no political or economic voice in this Country. Consequently, the buses are shit and there is little incentive to improve them. Doing further research, I have been informed that I would need to take 2 buses to get to my place of work in Livingston, and that journey would (allowing for a change of buses), take the best part of an hour and the same coming home. The bus(es) are forced to take meandering routes in order to make enough money for them to be sustainable. I have to be blunt here, you would have to tax me pretty much to get me to sit on a bus for that time. Yet I can be in central Edinburgh in about half an hour on the train?

John b @ 21

False. I didn’t get a driving license until I was 31, and held down a succession of well-paid managerial jobs throughout my 20s

Is it possible that your experience is atypical and that many of us do not live in well-connected, high volume commuting major city? I have no-idea where you live of course, nor I am I asking you that, but where I live, the better-paid jobs entail shift-work, out of the way (public transport wise). The jobs in the Town centre and dayshift orientated are normally over subscribed, and have Terms and Conditions that reflect this.

Taking out inflation, unleaded fuel is up 31% since 2003 according to the AA. Tax and duty on fuel has hardly increased at all once inflation is taken out – over the same period. The real reason why is that oil has gone up 140% over that period (ex inflation). A further problem in the last few years is oil in dollars and our pound has dropped 20%. So it’s all very complicated.

While I’m on the statistics, 85% of passenger-kilometres are by car in the UK with trains at 7% and the rest including buses, coaches, bicycles and foot the rest. The figure of 85% is an indication of how much we depend on cars these days. It will be very difficult and take a long time (decades?) to reverse this. It’s hard to see how the alternatives can provide the capacity to readily replace cars. The last time I looked the train operators said they are running at full capacity and bus operators cannot put on more buses without subsidies. With an ageing population, walking and bicycles are hardly a choice for many.

In the end, there are certain things that p*ss people off. Fuel price is one of those because it’s a very big expenditure for many people and they have no choice. So Adam is probably correct. (Other things that mess with people’s head are weird stuff like their bins not being emptied!)

Even if oil was not a factor in climate change we would still have to change the way we live. It has been running out since the first person in the ancient world lit an oil lamp. Now that does not mean even if we are at or near peak oil that we will suddenly wake one day and find there is none left. Almost every day new discoveries are made. However, the new discoveries being smaller fields are not replenishing the reserves as fast as they are being depleted. That suggests the cheap oil has already been discovered. Oil has been tremendously useful to us because it has a high energy return on energy investment. Depending on where the energy for extraction comes from even if the EROEI fell below 1 it might still be economical to extract oil Therefore, none of us will live in a world of no oil.

It would be nice to think that the oil price will gradually get more expensive and we incrementally adjust by adapting. Nice but unfortunately fantasy. There is almost no spare capacity so at the margins even marginal reductions in supply or marginal increases in demand have immediate huge impact on the spot prices that quickly are transmitted to consumers. A few per cent changes at the margins would be enough to double the price of oil.

I don’t think even the Greens seriously believe we can just overnight stop using oil. However, we can and must use it more efficiently and innovate alternatives. The UK energy intensity is better than most industrial nations. Energy intensity is a measurement of the cost of converting energy into GDP. High energy prices helped to push us towards more energy efficiency. I do not doubt for a moment that as oil rises in price those who spend a higher proportion of their income on fuel will be the worst affected. We can do things to ameliorate that and if we do not that was a choice by the government. However, I just do not see the driver for innovation without the higher prices. As oil prices rise the economics of all other forms of energy automatically change.

http://en.wikipedia.org/wiki/File:Energy_Intensity.png

http://en.wikipedia.org/wiki/File:Gdp-energy-efficiency.jpg

http://en.wikipedia.org/wiki/Energy_intensity

Is it possible that your experience is atypical and that many of us do not live in well-connected, high volume commuting major city?

Well, yes. But I wasn’t born in a well-connected major city, and I didn’t grow up in one. I moved to one because that was where the good jobs, public transport, etc, were. So can anyone else.

Hopefully, that’s one of the impacts that higher fuel prices will have: increasing urban density is an excellent way of reducing per capita emissions (urbanites use far less energy than suburbanites or ruralites).

John B @ 27

Well, yes. But I wasn’t born in a well-connected major city, and I didn’t grow up in one. I moved to one because that was where the good jobs, public transport, etc, were. So can anyone else.

‘Anyone’ else? Perhaps, but not everyone else, surely? Only a minority of people can move to the highly connected cities, though? You moved into your adopted city because that is where the best opportunities are. That is the point I was making. Had you stayed out in the outskirts of the large cities, the ability to get around out-with public transport become scarce. The point I was making is that for many of us our only option to fully participate in society is via a motor car.

Hopefully, that’s one of the impacts that higher fuel prices will have: increasing urban density

That is not going to happen though, is it? That is simply not viable to move widespread communities into a few large mega cities?

To put you into the picture, I live along the M8 corridor. There are dozens of large and small towns and more than a few villages between Glasgow and Edinburgh. We are not sweeping them up into two Cities anytime soon. We are going to have to come up with viable futures for these towns and the people in them.

That is where the greens and the other major players do not have solutions. They seem to not give a toss about the millions of people in this Country who simply have no viable alternative to private car travel.

27. john b – “But I wasn’t born in a well-connected major city, and I didn’t grow up in one. I moved to one because that was where the good jobs, public transport, etc, were. So can anyone else.”

So you’re agreeing with Norman Tebbitt and telling people to get on their bike?

Literally it seems.

And yet you (collectively) decided to come out against HS2 at your recent conference. How’s that getting fantastic train services? I read Caroline Lucas’s piece in the Guardian, and its pretty instant dismissal of the need to increase capacity, the main argument for HS2, was wholly unconvincing.

Jim – what about the new railway line that’s just been opened precisely to serve those towns? What about the other rail connections between Glasgow and Edinburgh (and stopping towns in between) that are being electrified and having their services increased? Even if your town doesn’t have a station, anywhere on the M8 corridor is only a short (ie “not using very much petrol” drive from one, allowing you access to employment, shopping, and any other services you might want in either major city.

If you live in Cornwall, you’re wholly car-dependent and that’s a problem. But if you live on the M8 corridor, or the M4 corridor, or in semi-rural Surrey, Oxfordshire, etc, then you’re only a short drive away from excellent rail services. Fuel isn’t a major issue, because you only need it for the last few miles.

John @ 31

Seriously mate, don’t get me started on the new railway. Although, I applaud, in principle the connection between Bathgate and Airdrie, it has started the inevitable in-fighting, backbiting and the usual suspects who are anti everything.

The problem is, we already have rail links to Edinburgh. However, the public transport to get you onto the platform of one of these new stations will still be pretty shit and we will be left with a huge white elephant in a couple of years, simply because there is not the infrastructure to back it up. Had the rail link actually been used to stimulate action to improve local public transport then it may have been worth it, but as usual…

The Edinburgh trams have had lots of opposition and again, the usual suspects have had a ‘scrap anything relating to bringing Edinburgh up to a reasonable European standard of city’ field day. We have had numerous calls for the project to be scrapped, even by people I normally think of on the Left of the spectrum. Another good idea, one to bring us into the twenty-first Centaury, but scuppered by a complete lack of ambition, and good old fashioned NIMBYism.

allowing you access to employment, shopping, and any other services you might want in either major city.

Not true though. You do not really have access to any reasonable supermarkets along that route. Nor does the railway go anywhere near decent sized employment hubs

“They seem to not give a toss about the millions of people in this Country who simply have no viable alternative to private car travel.”

I first started campaigning on these issues in the mid-1970s. It is interesting to remember that there was a short period, post-1973, when there was concern about future oil supplies and there was interest in designing our towns and cities so that there was less dependence on private car travel. It was, though, a very short period. Bill Rodgers’ transport Orange Paper of 1976 simply ignored the warning signs of the oil shortages only three years before. The assumption behind the transport policy in the Orange Paper was that working-class people would become car-owners like the middle-class and stopping this from happening would be unfair.

Decisions taken since then have increased dependence on private cars among working-class people. Housing and jobs and shops are located in places that are only easily accessible by car. Even the detailed design of these places makes walking and bus travel difficult. I don’t know the M8 corridor but I do know many former mining and industrial areas in England and the trend has been for them to be “regenerated” in a way that makes it difficult to have access to jobs and facilities without having a car. People like myself warned about this in the mid-1970s, and advocated planning for easy access by foot, cycle and private transport. We were ignored. If there are millions of people who have no viable alternative to the private car, and many of these are relatively low-paid, that is because of decisions taken over the last 35 years despite the warning signs of the first oil shock.

The longer that we wait to take corrective action, the more painful it will be. However that does not mean that people who talk about the issue don’t care about people who are dependent on their cars. Pretending that the dependency does not exist doesn’t resolve the issue. In neo-classical economics the present price of oil should be a clear signal that oil will run out and there is nothing so convenient that can take its place. It is interesting to note how this signal has become distorted with (for example) the Labour transport spokeswoman saying that the duty on petrol should be reduced because we are all so dependent on it! The price of fuel has not provided a clear signal: it has led to confusion and denial, because our dependence is so great and reducing that dependence would require a large, collective effort that our political system is poorly equipped to carry through. The very people who are nominally are in favour of price signals are the ones most in denial about the oil price signal.

I do care about people who are dependent on their private cars. One of them is mymother who is nearly ninety and couldn’t even shop and get her prescriptions without one (and who knows what she tells the Doctor about her fitness to drive!) But don’t blame the Greens: blame people like Bill Rodgers who said that it would be pulling up the ladder if we didn’t make the working class dependent on private cars.

I don’t think the amount of uncertainty about whether Pigouvian taxes on fuel make people buy more fuel-efficient cars displayed in comments above makes sense. Their sales have gone up in recent years following a pattern which many economists regard as correlating sufficiently strongly with rising and falling fuel costs to interpret as a case of causation.

The problem is that the effect is disproportionate. The rich don’t feel it and go on motoring. The poor are pauperised because a ruling class that doesn’t need to provide affordable public transport won’t provide it, leaving them at the mercy of the price of petrol.

Good article.

P.S. I notice the original version is titled “How should Greens deal with rising petrol prices?” while an LC sub-ed has given us “Greens should resist the temptation to celebrate rising petrol prices”

LC sub-eds should resist the temptation to sex up titles by creating strawmen.