Daily Score

The nifty image to the right, taken from today's issue of The New York Times, says a lot:  gas prices, coupled with recession jitters, have ushered in a sea change in the vehicle market.  Fuel efficient cars are flying off the lot, while cars and trucks with big tanks are, well, tanking.

Hybrids aren't the only winner in this auto race.  High-mileage compacts -- the Honda Fit, Toyota Yaris, and Ford Focus among them -- are experiencing a substantial sales boost too.

But to me, the most fascinating part of this article is this:  recent trends have completely upended the "conventional wisdom" about how consumers respond to high gas prices. 

You see, It used to be pretty common to read press stories that implied that drivers had no ability, or perhaps no willingness, to adjust their transportation habits in the face of higher prices.  As gas prices rose, the stories went, consumers were doing almost nothing in response, other than tightening their belts in other areas.

In the Northwest at least, this has been false for a while.  Gas consumption, measured per capita, has been going down for the better part of a decade.  Still, the idea that gas prices were having no effect on driving seemed to be pretty much ubiquitous.

But now, look at what the Times says:

How the downsizing of America’s vehicle fleet will affect fuel consumption is still largely unknown. When gas prices rise, as they are now, many drivers simply drive less to save money. [Emphasis added.]

That's right -- the article takes the link between rising prices and driving for granted.  They don't even bother to source it -- meaning that by the Times' standards, it's basically self-evident.

I think it's another sign that we've reached something of a tipping point:  people are starting to understand that many families do, in fact, have some flexibility in how much they drive, and how much gas they use.  And as gas prices near $4 per gallon, people are figuring out ways of cutting back. 

Of course, "price elasticity " (as this effect is called) has been the conventional wisdom among economists since the days of Adam Smith.  So it's nice to see the idea finally getting a little ink for a change.

Years ago, I heard from an economist friend about research showing that urban rents rose with oil prices in the 1970s, while suburban ones fell. Ultimately, land values reflect the shifts in the values of many things. So rising fuel prices would be expected to have the effect of making fuel-guzzling neighborhoods less desirable and fuel-sipping ones more desirable. We’re starting to see that pattern now.

Today’s top news story on Sightline Daily’s news page describes the way the subprime mortgage crisis is slamming suburban real estate. A similar story ran earlier in the Atlantic Monthly, as Kristin pointed out in today’s editor’s note.

Meanwhile, in Seattle at least, property values are holding strongest in the ring of walkable neighborhoods circling downtown, as the Seattle PI reports.

Reporter Aubrey Cohen notes a shift among buyers toward walkable neighborhoods:

“Many prospective buyers say they want "walking neighborhoods," [real estate agent Stacey] Brower said. "They want to be able to get up on Saturday morning and walk to a coffee shop and get a paper, or walk to a restaurant on Friday night."

“[Realtor Bob] Melvey also has noticed an increasing interest in walkability over the past five years, he said. "It's really wanting to be walking distance to a sense of community."

This new NRDC report (co-released with some major electric utilites) is kinda cool:  it looks at the potential financial windfalls to the nation's top 100 electric power companies under competing "cap-and-trade" bills currently being considered by the US Congress.  A key difference among the proposals is how many emissions permits the government gives out for free, and how many are sold at a public auction.

The report puts a spotlight on two federal bills in particular: the Lieberman-Warner "Climate Security Act" (pdf summary here), represented at the top of the chart to the right; and the Bingaman-Specter "Low Carbon Economy Act," represented in the bottom of the chart.

In the images to the right, the blue wedges represent the carbon permits that are given out for free -- and obviously, the blue wedges on the top graph, representing Lieberman-Warner's approach, are smaller than on the bottom graph, representing Bingaman-Specter's.

As NRDC points out, even with a relatively low carbon price of just $10 per ton, grandfathering means big money to the biggest utilities:

"The ten largest investor owned utilities would receive an annual allocation valued at $6.2 billion, assuming a CO2 allowance price of $10 per ton [under Bingaman-Specter].  To provide a sense of the magnitude of this value, this is equivalent to 16 percent of the companies’ total earnings in 2006.

Wow.  That's a huge earnings boost, and those utilities' shareholders will be sure to see some major gains in stock prices.  Of course, that "value" doesn't just appear out of nowhere.  It comes from the companies' customers, who have to pay higher prices for electricity without getting anything in return.