Road Tax (Electric Vehicle Issue), De-regulation (Natural Gas), & Gasoline prices
Given my fortunate position of being so busy that I can’t blog as much as I want; I am trying a new format for blogging. “Quick” summaries of blogworthy articles.
I have been telling people to look, re-examine the economics for non-traditional gasoline/diesel vehicles and make sure it includes some sort of recovery for the loss of tax revenue. Many show the calculation for comparing electric vehicles, assuming the gain from tax revenues will be there forever. I am surprised it is coming to the forefront this early with penetration of alternative vehicles still in the low single digits. Article on electric and hybrid vehicles draining dollars from road tax
My neighbors always ask about who they should choose for their energy provider. In many markets, the ability to choose a provider for natural gas and electric generation is now available. The system is still not fully de-regulated given the providers still have regulated rates of distribution which will be paid to the incumbent utility, commonly called non-by-passable cost/rates/riders. In theory, the open choice concept will reduce the inefficiencies in a regulated company by offering a form of competition. By doing so the consumer in the long run should save.
However, like most things involving customer decisions, it is more complicated than that. Many things influence the decision of the consumer and as the article alludes to the key thing is knowledge. Knowledge is not just information but the ability to understand the information to make informed decision. The consumer has significant amount of information available to them via the internet. I would suspect information is not the issue, it is the consumer who does not have the ability to really convert the information to knowledge, particularly given their decision will only impact them less than their monthly cell phone bill.
As I point out to my neighbors, I don’t have time to analyze each of their choice for them, but I do suggest not doing anything about their gas bill. Why would I do that? Natural gas really offers no competition in order to weed out inefficiencies that a utility may build up. In electricity, there are many opportunities to make inefficient decision making. An example of poor decisions is building a coal plant assuming natural gas prices will be greater than $8/mmbtu. Natural gas is natural gas. Commodity risk is limited through hedges. The pipeline and delivery cost has to be recovered through the regulated rate portion which all providers must pay. The ability for the gas utility to make a poor capital allocation is limited compared to electricity. Alternatively a provider in natural gas can only give you so much of their margin before they are equal to the competing regulated utility. Article demonstrating natural gas choice as a failure for the consumer
Word of caution for the administration – don’t take credit for the lower gasoline prices. Each year around this time the administration takes a look at the gasoline prices and starts taking credit for lower prices. However the market is seasonal; prices typically always come off in the fall and into the winter time period when people drive less! Article falling gasoline prices
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