Personal Family Budget

THE CHALLENGE

The price of gasoline rises and falls depending on global supply and demand, and prices can snap back just as quickly as they plunge. As reasonably priced oil gets harder to find and extract, and as developing nations feel the pressure of consumer demand for transportation, inevitably there will be price spikes. And families will feel the impact.

Wild price swings at the pump is terrible for consumers. When prices spike, it’s like a regressive tax on the middle class and the poor, who spend a greater portion of their income on gas than the well off. Also:

When gasoline prices rise unexpectedly, it forces consumers to delay large purchases like upgrading household appliances and maybe even buying a new car.

Price spikes also drive up the cost of other goods as well — food, clothing, electronics, anything that’s transported by vehicles that run on gas or diesel.

Housing values can even be affected. A May 2008 report authored by economist Joe Cortright showed that home values in far-flung suburban areas fell more steeply than in metropolitan areas, because high gas prices made long commutes from the suburbs less desirable. “The gas price spike popped the housing bubble,” Cortright wrote.

According to the well-rehearsed ritual, prices shoot up, then we complain about having no control. But we still pay whatever the price is, because we have to. Some people do have control, however: They drive vehicles powered by electricity, compressed natural gas, or hydrogen. There also are more than 20 million flex-fuel vehicles on the road, capable of running on any mixture of gasoline and ethanol, up to 85 percent ethanol (E85). But for the rest of Americans, their cars, pickups or SUVs can only take gasoline. Wild price fluctuations highlight our biggest problem in transportation: Oil is essentially our only option, and it’s been this way for a century.

FUEL FREEDOM AS ONE OF THE SOLUTIONS

As John Hofmeister, the former Shell Oil president and Fuel Freedom board member, says: “We will never get past the volatility of oil until we get to alternatives to oil.” Consumers need a stable price for fuel, without unpredictable price swings. Adding higher ethanol blends will help reduce the cost structure of fuel over the long term.

Fuel Freedom Foundation is working to create the market conditions necessary to put alternative fuels on an even footing with gasoline. One day, drivers will pull up to their neighborhood station and be able to choose from a menu of fuels — whichever one is best for their vehicle and their budget.