At the risk of blaspheming, the situation for public transit is ‘$4 gas giveth, $4 gas taketh away, blessed be $4 gas.’ High fuel prices pose hard choices.
In the long run, high energy prices favor transit, as many find riding a better choice than driving.
But in the short run, expensive fuel brutally increases operating costs of transit providers at a time when government budgets seem stretched by other factors. Raising fares just as more people seek transit services seems counterproductive, but may be the least bad option.
The higher the direct cost of driving a car, the more likely people are to take a bus or train. It is a textbook weighing of costs and benefits, just like standing in the supermarket deciding whether to buy chicken breasts or ground beef for dinner.
For many, driving takes less time and is convenient in other ways. They can leave home or work when they want without being bound to the schedule of some bus that only passes at 20-minute intervals. They can go to a mid-day teeth cleaning appointment or pick up a sick child from day care. These are harder if the car is in the garage back home.
Riding often costs less, considering both vehicle operating costs and parking, especially if it allows a family to get by with one car instead of two. It may be more relaxing, as you can read a magazine while a professional driver battles a clogged freeway.
Different people put different weights on these tradeoffs, so changes take place at the margin. Just as a 20-cent increase in the price of chicken doesn’t make everyone eat only beef, a change in the price of gasoline — or in transit fares — doesn’t shift everyone on or off the bus at the same time. But the larger the price change and the longer it persists, or the longer people expect it to persist, the greater the change in ridership.
Gasoline prices have increased dramatically. People increasingly see the change as a long-term one and are making adjustments. SUV sales are in the toilet, while hybrids are selling as fast as they can be turned out. And more people are riding buses and trains.
Adding another passenger on a transit vehicle increases costs very little. The fare paid adds to revenues more than the payer adds to costs.
The bigger problem now is the dramatic increase in the price of diesel fuel on existing routes. Though transit often is an energy-efficient way to move people, fuel is a large fraction of a transit authority’s operating costs. Just as for households, those costs have nearly doubled in the past 18 months after having doubled already in the half-decade before that.
Transit managers have to square their budgetary circle somehow. They can further cut service, somehow obtain greater government appropriations or raise fares.
The first, cutting service, flies in the face of obvious increasing public need.
The second, greater government funding, may be the economically efficient alternative. Government subsidy of a service like transit is economically justified where there are significant spillovers of benefits to the public as a whole. Every Metro Transit bus rolling up the shoulder of Interstate 35E during rush hour may mean 50 fewer cars on the same road further hindering other drivers. It means less air pollution. It means less energy consumption.
But for practical political reasons, greater funding isn’t in the cards right now, at least not in time to pay 2008 or 2009 diesel bills. That leaves Metro Transit with the option of raising fares.
This is unfortunate, because transit faces a potential virtuous circle. Drivers flee $4 gas and get on the bus. Increased ridership allows more frequent service and service on new routes. In a network effect, just as each friend with a cell phone camera makes an adolescent’s own camera more useful, improved transit service makes transit a more competitive alternative, which attracts more riders, and so on. That will still happen if fuel prices stay high. But higher fares will slow the process.
© 2008 Edward Lotterman
Chanarambie Consulting, Inc.