Gas prices hit an all-time high this week, according to AAA, and many Americans seem to be in disbelief.
It hasn’t been that long. The last time we had a run of high gas prices was from 2011 to 2014. True, prices then maxed out at just under $4 a gallon. But adjusted against wages or inflation, prices felt even higher then. It was a major issue in the 2012 presidential campaign. We adapted—by fracking the hell out of the Great Plains and becoming the world’s top oil producer—and the issue was basically forgotten.
Until now. Spurred by post-pandemic demand and Russia’s invasion of Ukraine, oil prices have gone vertical. Some Democrats want a gas tax holiday; Joe Biden has blamed oil companies for not taking him up on the permits he’s offered, and drilling; Republicans say environmental policy is at fault. Some economists think Congress needs to offer financial guarantees to the fracking industry.
Obviously, everyone and their mother is mad, mad, mad about the high price of gas, in part because Americans now are back to driving just about as much as they did before the pandemic. We’re not going to the office, but we’re not staying home. From Virginia to Colorado, drivers are liable to pull up to the pump and be greeted with a sticker of Joe Biden, pointing at their total: “I DID THAT!”
A look back at 2011 suggests an interesting counterfactual: What if, facing those high prices, we had made changes on the demand side instead? Believe it or not, this was what some people thought might happen. President Barack Obama took that moment (and the conditions created by the auto bailout) to set new Corporate Average Fuel Economy standards, known as CAFE, which put in place ambitious fuel efficiency goals for automakers. “Slowly but surely Detroit is shifting its attention from SUVs to cars,” All Things Considered reported in March of that year.
Another artifact of that heady time not so long ago was the widespread sense that the American city was reclaiming its long-lost allure, prompted by a combination of those high gas prices, low crime rates, and generational change. In an emblematic column in the Harvard Business Review, “Celebrating $4 Gas,” the economist Matthew Kahn wrote that “some people (especially the young, older households, and those who work in the center cities) will increasingly live an urban life, occupying high density apartment buildings close to public transit and walking to stores.”
Of course, Americans did not wind up driving smaller cars, taking more public transit, living in smaller homes, or inhabiting more walkable places. In fact, we did exactly the opposite.
Had any of those things come to pass, we’d be much better positioned to weather sticker shock at the pump. It’s only going to get worse come summer, as road trip season arrives and pricier “summer blends” arrive from refineries. (Yeah, there’s a winter blend and a summer blend of gasoline, adjusted to evaporate at different temperatures.)
What happened to the emissions standards? Automakers complained that one-size-fits-all miles-per-gallon goals were not fair to producers of bigger, heavier vehicles. The Obama administration responded with a loophole for vehicles with larger footprints, and the auto companies drove a giant pickup truck right through it. (And then ended up turning against the standards entirely, arguing they were still unfair given the bigger cars that Americans wanted to buy.) By 2018, Fiat Chrysler, Ford, and GM weren’t just selling fewer sedans—they’d stopped manufacturing them in the U.S. altogether!
Some analysts anticipated this might happen. In 2011, Steven Skerlos, a University of Michigan professor who studied the CAFE standards, predicted that the loophole for larger cars would produce unintended consequences: “Will cars get bigger? Very possibly. Will that lead to more pollution? Yes.” As gas prices slid toward a 15-year low during the fracking boom, buyers went nuts for SUVs and pickup trucks. By 2018, two in three new vehicles sold was an SUV or a pickup—up from less than one in two a decade earlier.
That’s had a number of consequences, such as killing a ton of pedestrians, but for our purposes, the important thing is that it made America much more sensitive to high gas prices than we might have been otherwise. According to research from the Paris-based International Energy Agency, “a large share of these fuel savings [produced by the CAFE standards] has been offset by increased vehicle weight and power.” In the United States, the IEA concludes, our shift toward bigger vehicles has negated 40 percent of the fuel savings unlocked in the wake of the Obama-era CAFE standards. That’s a lot of gas!
Were the automakers focusing on their most profitable products, or responding to American demands? Both. But forward-looking federal policy—from hiking the gas tax when oil prices fell, to discouraging the design of massive new trucks that get 20 miles to the gallon—might have nudged car buyers in a direction where they would be less troubled by today’s gas prices. (And, as a bonus for the climate, burning less gas.)
The other demand-side change that would have come in handy today was helping people live without cars entirely. That a car is a prerequisite for a job, an education, or a social life is a tremendous financial burden right off the bat, and that’s particularly true when gas gets expensive. American transit ridership has traditionally risen during periods of high gas prices, and in cities where vehicle traffic has bounced back from pandemic-era lows but transit ridership hasn’t, like New York, residents may have an easy offramp from fueling up.
But most people don’t have that option, because politicians spent the last decade squandering demand for urban living by refusing to build any housing there. Instead, they allowed car-free or car-light neighborhoods to appreciate into exclusive enclaves while population growth shifted into the suburbs. Some people really did want that drive-everywhere life, but if real estate prices in walkable American neighborhoods are any guide, many more would have liked to be able to leave the car at home now and again.
The fracking boom spared us from adopting any of the lifestyle changes prompted by the last gas price spike. So now, with gas prices in some states beginning to look like the frequencies of AM radio stations, we’re driving bigger cars and living in places where we need them. Those trends are hard to undo overnight. You can see why Biden and Democrats facing down midterm elections are instead thinking: Cut gas taxes and start drilling.