Monday, 27 May 2013

More cars and suburbia: the economics of car use and sustainability …

“No rational concert promoter would decide how big to build a stadium based on the number of people who would come to see the Grateful Dead if the tickets were free. But that is often how transportation planners decide highway capacity: they estimate how many trips would be made on an unpriced facility, then try to build a facility big enough to accommodate that number of trips.” Moore and Thorsnes, ‘Transportation/Land Use Connection’, American Planning Association p.57

“There is nothing revolutionary about providing ‘free’ transportation. It is done by every elevator in any office building or apartment. The cost of the service is collected as part of the rent from all tenants, whether they use it 100 times a day or not at all … The driver benefits when his neighbour leaves his car at home and takes the subway or bus. But if everyone who comes downtown each day by public transport drove a car, there would be an enormous traffic jam. It is true, of course, that not everyone wants to drive downtown. But, then, not everyone uses a park or playground, yet all pay for it.” Blumenfeld, ‘The Modern Metropolis’, p.166

Let’s spend this post looking in a bit more detail at the cost structures associated with the different transportation options that underpin the built environment in our two idealised cities, “Los Angeles” and “Paris”. Of the two forms, the car and underground rail, the cost structure of the former is far more complex and, I would argue, much more relevant to the question of “sustainability”; so we’ll spend most of the post looking at the costs to the individual and society of private car usage, and try to look at some recent data in order to begin to quantify the various costs.

Let’s however first summarise the cost structure and urban density implications of underground rail. The fixed costs – digging tunnels and underground stations, and equipping them with signalling and trains – are very high, and therefore the debt load necessary to build the system is also high. The variable costs (electricity, maintenance and personnel) are comparatively low. It is relatively inflexible but once built it is in place virtually indefinitely, and therefore suits large cities that are stable in spatial terms. It is relatively straightforward to build high capacity for ‘peak passenger loads’ into the system, for the rest of the time the system will generally operate with substantial spare capacity. The feeder network is pedestrian – i.e. the system operates on a “walk-train-walk” basis in order to go door-to-door, and a convenient walking distance of say half a mile to the nearest station determines the catchment area for each station. The system is therefore only cost-effective in large high-density (compact) cities. However, for those cities the capital costs are relatively easy to amortise over a long period of time because they tend to have high value-added economies, high incomes, high property values and therefore large tax bases. Apart from requiring density, the underground system is independent of the design of the urban streetscape.

With Blumenfeld’s elevator analogy, it is theoretically possible to imagine an approach that says that in a high rise building, movement via the stairwell is free, but that the additional costs of installing an elevator will be met by charging the residents of the higher floors a fare for each trip. Obviously, this would be “fair” for the inhabitants of the ground floor. In reality the costs of building and operating an underground system are impossible to cover by charging fares (they are simply too high). But just as are the high rise building and the elevator are entirely symbiotic (movement by stairwell becomes increasingly inconvenient and then virtually impossible the higher you go), so is the underground rail network with a large and compact city. In this sense the provision of transport as a free good is both necessary and probably inevitable.

Turning to the car, what is the cost structure of car ownership? These are somewhat more complex than for a public transit system: they fall under the general headings costs to the individual or household, infrastructure costs which must be borne by the city as a whole, and what Jane Jacobs would probably regard as “urban form costs” which are less quantifiable but in my view just as critical.

The costs of car ownership for the individual (or, more generally, household) are in simple terms divided into fixed costs (purchase of the car, insurance, tax and depreciation) and variable costs (overwhelmingly petrol/gasoline but also maintenance and any road tolls or parking costs). Things obviously get more complicated in reality: for example, depreciation will also increase when the car is driven a lot, cars themselves vary significantly in cost and fuel consumption, and technologies such as hybrid and electric cars change the parameters.

However, let’s look at some recent data to get a broad picture of the scale of costs for the household – this from a Canadian survey:

So we’re talking about approximately CAD$7,000 fixed costs per annum for a single medium sized car. It’s probably safe to assume that the average suburban household is at least a two-car household: therefore let’s say $14,000. As far as variable cost is concerned, it is interesting to note both the absolute amounts but also how it will escalate dependent on fuel costs – a doubling of the price of petrol will roughly double the variable cost component of the car driven 32,000 kilometres per year (i.e. about 55 miles per day) to about $8,000 p.a., leading to a total household annual cost per car of $15,500. Therefore a two-car household, with both cars being driven 32k kilometres p.a., would be facing total costs in the order of $31,000 p.a. in the event that petrol prices double from when the survey was done. 

With regard to variable costs, the important things to conclude are: first, that while the marginal cost per kilometre driven is a very small number ($1,500/12,000 or $0.125 per kilometre for this car), when an individual or household is locked into a requirement to make long commutes the costs are significant; and second, that those costs escalate in step with petrol price rises.

Let’s take a look at what has been happening to petrol prices (data from the US):

In other words, since 2008, despite the US (and most developed economies) having flat-lined at either very low growth levels or outright recession, petrol prices have risen substantially, reflecting global crude oil prices. The following charts shows two significant processes: first, that just as after the 1989 oil price spike, US drivers are in the process of significantly reducing their consumption of petrol; and second, that crude oil prices remain at far higher levels than in the 1990s and most of the early 2000s despite the ongoing recessions in many of the major developed oil-importing countries.

Without delving into the dynamics of the world oil market it is probably fair to conclude that elevated crude oil prices over a period of several years reflect a combination of two factors: on the supply side a ceiling having been reached in world production, and on the demand side the rise of a car economy in Asia (and in particular China). The relevance of these data for the sustainability of the car suburbia model of urban growth is fairly clear – namely that if a fundamental shift has taken place which brings into question the premise of cheap petrol, and that this reflects a long-term shift in supply/demand balance of the global oil market, then the question arises how far the red line of average per capita gasoline consumption can continue to decline while car dependent suburban life remains viable?

But while it is probably a truism to say that car suburbia lives or dies depending on the price of petrol in the long run, this is not to say that a suburban car-dependent lifestyle which is “sustainable” one year with crude oil at $20 a barrel will be “unsustainable” the next year with crude oil at $100 a barrel. Reality is much more complex: to go back to a Jane Jacobs quote from a previous post, just as “the ideal of the suburbanised anti-city was developed architecturally, sociologically, legislatively and financially” on the foundation of a single technology, that of affordable individual car travel, so any transition to a new urban model will similarly depend on the ability of societies to cope with the political, financial, technical, architectural and legislative aspects of that transition.

In many respects the most interesting questions revolve around the technical modalities and time-frames of re-fitting and adapting the existing car suburbia format to alternative transport structures and living arrangements. However, the history of previous transformations of urban form in the US is ominous: in particular the social, political, economic and financial implosion of many of the inner cities in the 1970s and 1980s. Just as Jacobs identified complex feedback loops and self-reinforcing dynamics as the key drivers of spatial dispersion in car suburbia, I would argue that the financial and economic dynamics that promoted suburban sprawl are subject to equivalent feedback loop phenomena, with the attendant threat that long-term “virtuous cycles” of expansion can rapidly turn into “vicious circles” of contraction. I will take a closer look at the infrastructure aspects of suburban cost structures and the financial-economic dynamics in the next post.

1 comment:

  1. Hi Ian - great blog but it is time to update after the summer break! Looking forward to the next posts - J.