Gasoline Price Comparisons: Taxes not Octanes Matter

The original subject is gasoline prices but before we know it, the story becomes about taxes. The graph below shows the stark contrast between 10 states in the U.S. and 10 countries in the European Union, or E.U.


Among the states shown, the lowest gas price is in Oklahoma at $2.532/gallon and the highest is in Hawaii at $3.54/gallon. This one dollar difference is actually a 40% difference. Among the EU countries shown, the lowest gas price is in Spain at $5.496/gallon and the highest is in The Netherlands at $7.382/gallon, a 34% difference between them. The gasoline price in The Netherlands is 110% higher than Hawaii’s. (June 2010 US$ and EU euro rates.)

A similar situation is observed for a small sample of worldwide islands (see below). Most island gasoline prices are twice as high as those in Hawaii. Despite the high prices, all cities in the islands shown have significant problems with congestion. This is because gasoline pricing tends to affect vehicle choice, and has a small effect only on vehicle ownership and use.

At places where gasoline price is relatively low, the typical vehicle has a V6 engine and delivers about 20 mpg in city usage. At places where gasoline price is twice as high, the typical vehicle is a 3 or 4 cylinder subcompact delivering about 40 mpg in city usage. So based on these vehicle choices, driving 12,000 miles per year at either place costs the same for fuel.

Going back to the first graph and comparing The Netherlands with Hawaii we ask: What can possibly explain a 110% difference for the same gas? It’s not technology, it’s not manufacturing, and it’s not transportation. These are less than half of the story. The “larger half” is taxes! See below:

Governments worldwide use taxes to finance general budgets and other infrastructure. Fuel taxes are among the first to be increased when budgets cannot be met. The price of gasoline is “inelastic” as economists call it, that is, a large change in the price of gas (say, +30%) does not correspond to a proportionally large change in highway travel (-10%). This is generally true for urban travel and less so for intercity travel where larger travel reductions may be observed.

Overall the lesson here is that taxes on gasoline are a cash cow for governments. Gas tax does practically nothing in reducing congestion. It may reduce pollution somewhat by forcing lower income people to purchase smaller cars, but it does this at a very high overall cost. The overall cost is high because a large part of the economy worldwide “rides on the streets.” Foods, goods and services need to be brought to the market, delivered, installed and maintained.

Expensive gas makes for expensive commuting, repair services, food and appliances. Gas taxation limits mobility, slows economy and reduces the standard of living.

In more general terms, high energy costs exacerbated by heavy taxation on them are a brake in progress. For a vibrant economy, countries and regions need to optimize their energy portfolio and reduce the taxes on it.

Hawaii energy costs are high and climbing. If the status quo continues (oil dependency and heavy subsidies on low productivity and hyper expensive alternatives), then by definition Hawaii’s long term economic outlook cannot be rosy.

Acknowledgment: Recent civil engineering graduate Michelle Coskey conducted a large part of the research and data compilation in this article.

Yet Another U.S. City Reveals Politicians' Rail Lies

Audit: Norfolk officials knew of light-rail overruns, kept silent. Cost overruns of 45% were hidden very much like Honolulu Transit Division hides from inquiries submitted by city council members and refused to cooperate with Governor Linda Lingle consultant investigating the proposed rail's finances.

Here's the story at Norfolk, Virginia: "City officials knew costs skyrocketed since 2007 but failed to reveal information to City Council. State inspector general indicated that HRT officials intentionally misled federal, state and some city officials about the amount of the overruns, to the point of maintaining a second set of books."

Norfolk is building a 7.4-mile light-rail line, the biggest public works project in Norfolk’s history. Originally $232M, now ballooned to $338 million, paid for with federal, state and city funds.

This excerpt also makes painfully clear the difference between heavy and light rail. Light rail in Norfolk is costing them $46 million per mile including the 45% cost overruns. Honolulu's heavy rail will cost $265 million per mile plus overruns. This is yet another version of Peter Carlisle's definition of "fiscally responsible."

If you recall, the other one is that rail will cost us about one million dollars for every car it will allegedly remove.

Chromium-6 In Honolulu's Tap Water

Original post below. Please read the endnote.
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In 1996 the cancer-stricken residents of Hinkley, CA won a $333 million settlement from PG&E for contaminating their tap water with hexavalent chromium, which is commonly abbreviated as chromium-6. This was the basis of the 2000 movie Erin Brockovich starring Julia Roberts.

Fast forward to 2010: Tap water from 31 of 35 U.S. cities tested contains chromium-6 according to laboratory tests commissioned by Environmental Working Group (EWG). [Click for a summary of the EWG report.] The highest levels were detected in Norman, Okla.; Honolulu, Hawaii; and Riverside, California, as the table below shows.

City ------------------------ Population ----- Chromium-6 in Tap Water
Norman, Oklahoma ---------- 89,952 --------------- 12.9 ppb
Honolulu, Hawaii ----------- 661,004 --------------- 2.00 ppb
Riverside, California ------- 280,832 --------------- 1.69 ppb
Madison, Wisconsin -------- 200,814 --------------- 1.58 ppb
San Jose, California -------- 979,000 --------------- 1.34 ppb

The EPA has not yet set a limit for chromium-6 in water despite mounting evidence of the contaminant’s toxic effects, including an EPA draft toxicological review that classifies it as “likely to be carcinogenic to humans” when consumed in drinking water.

According to EWG, the National Toxicology Program has found that chromium-6 in drinking water shows clear evidence of carcinogenic activity in laboratory animals, increasing the risk of otherwise rare gastrointestinal tumors.

California officials last year proposed setting a public health goal for chromium-6 in drinking water of 0.06 parts per billion (ppb). The level of chromium-6 in Honolulu's tap water is 33 times over this proposed limit.
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Note added on December 29, 2010: This article suggests that the Chromium-6 reported amount in tap water is of no consequence to human health.

Those Who Ignore History Are Likely To Repeat It !

Cradle to Grave -- The Holistic View for Sustainability

I am from Waipahu High School. May I ask you a question about hydropower for my science project? In your opinion, will hydropower energy be a successful alternative energy in the future? Will it prevent global warming?
Donnalynn Agpaoa

Donnalynn's question is important and almost universal. Its generic version is: Will Technological Option X be a successful alternative? I'll get to the generic form later, but first, here is my answer to her.

Hydro-power can be very powerful. Its electricity generation is clean, and reliable for 100+ years, if designed properly. Kauai has a small but successful hydro-power generator.

Now lets take account of the negatives.

Hydro-power can destroy ecosystems, and in some cases villages, cities and regional cultures may disappear, as they become submerged in the reservoir (lake) behind the dam.

The dam itself may be viewed as an eyesore. Also it is somewhat risky. If it fails, there will be catastrophe downstream.

One important consideration in the total picture is the amount of steel and concrete that's needed to build the dam. The amount is massive and the manufacture of the necessary steel and concrete will create a lot of pollution. Similarly, the machinery that will build the dam will pollute as it works to build the dam, and the machinery itself created pollution when it was built.

So, say, a Caterpillar front-loader has a life of 30 years and will work at the dam site for 1.5 years. Therefore 5% of the resources and pollution that went to manufacture the front-loader need to be "billed" to the dam project.

We have to take into consideration all these cradle-to-grave sustainability impacts in order to correctly derive the total impact of the proposed hydro-power infrastructure.

As for your hydro-power question, the correct answer is that it can be green but not necessarily. We need to evaluate each and every proposed project, add all its pluses and minuses, and then decide if it is a good project.

=====

In general now, in several cases what appears "green" or "good" is the opposite when all its impacts are accounted for. For example, electricity produced by coal or oil is neither clean nor green.

That's one of the reasons that I oppose the city's elevated heavy rail plan. The promoters call it green, the engineering calls it dark black!

And that's one of the reasons environmentalists dislike the new EPA ratings for electric cars. For example, the Nissan Leaf gets 106 mpge (or MPG-equivalent). Quoting the LA Times:

"Things got hairy with the Leaf. The EPA worked out a formula in which an electric car using 33.7 kilowatt-hours of electricity was considered equivalent to a standard vehicle using a gallon of gasoline.

[On the other hand, a better] process would consider all the greenhouse gases released from the time the electricity is first generated until it is sent through transmission lines to charging units. Based on such measurements, the Leaf would rack up more than 250 grams of CO2 and other emissions every mile, according to data from the Energy Department's Argonne National Lab. Gasoline-fueled cars on average release 450 grams a mile.

The fact that the emissions came from a coal plant producing electricity in Utah is just as bad as if they came out of the tailpipe."

Sustainability is often misused for marketing purposes but in the right hands it provides a mindset and tools to get a holistic view of the impacts of a technological option as small as a solar panel or a household appliance, and as large as a hydro-power dam or a transportation system.

Taxes Poison Growth. Hawaii Politicians Love Taxes. Stagnation!

In the text below, I copy the analysis done by the Illinois Policy Institute titled Do Higher Taxes Chase Away People, Wealth, and Jobs?

I changed one word: Illinois to Hawaii. It all makes perfect sense for Hawaii. With one difference: Illinois charges moderate-to-high taxes. Hawaii charges very high taxes. So the call to reduce taxation is much more urgent for Hawaii than it is for Illinois.

Nationwide data from the last ten years show states that limit their tax burdens economically outperform those that don’t. High taxation drives people, wealth, and jobs out. Lawmakers should emulate the low-tax, business-friendly policies of high-growth states.

The table below makes it clear: Nationwide data indicate that high tax burdens hurt economic growth. From 1998 to 2008, the ten lowest-taxed states economically outperformed the ten highest-taxed states on many key measures.


The lowest-taxed states (2008 state and local taxes as a percentage of personal income) include Oklahoma, Texas, South Carolina, Colorado, Missouri, Oregon, Alabama, Tennessee, New Hampshire, and South Dakota.

The highest-taxed states include Alaska, New York, Wyoming, North Dakota, Hawaii, Maine, Vermont, New Jersey, New Mexico, and Connecticut.

The economic "winners circle" is clear. Hawaii is nowhere near it. Government spending reduction and tax reduction are necessary. The alternative is what we've got: Prolonged economic stagnation and prayer that the tourists will come. And for those who did not get to the bottom of it yet, the proposed rail is permanent heavy taxation, the results of which are described in the table above.

Chronology of Mufi's Rail (Update 1)

Here is the rail update at the conclusion of 2010.

2004: Rail will cost $2.7 Billion and 1% GET charge is needed.

2005: OK fine, 0.5% tax will do it – we’ll get $450 Million from the FTA.

2006: Rats! The Alternatives Analysis had to spoil it. Rail will cost $4.6 Billion.

2006: Rats! Cliff Slater noticed that the 2000 Bus Rapid Transit also planned by Parsons Brinkerhoff for the Harris administration had higher projected ridership than rail. So... with rail we pay 3 times more to get less.

2006: City will have Feds give it as much as Los Angeles and New York City: $750 Million.

2007: This state is run as a banana republic. As such, it starts collecting people's taxes to build a system that has no environmental approvals.

2007: Smoke and mirror events begin in earnest paid by taxpayers. Neither Leeward Community College nor UH-Manoa get any stations.

2008: Hannemann gives a helicopter ride to Oberstar who then says that Feds will give $900 Million. Hannemann declares that “the train has left the station.”

2008: Senator Inouye says that if we lose the EPA lawsuit for sewage treatment the $1.2 Billion bill “will break the back of the city.”

2008: Council support is shaky. Back room deal-making results in a route via Salt Lake.

2008: DEIS comes just two (2) days before the General Election and referendum or rail promising a ridership of 97,000 in the opening year! (No modern light rail in the US, even in cities 5 times bigger than Honolulu, carries more than 38,000.)

There is no time to review the DEIS but Inouye advises that people only need to read the summary. Fed share is now claimed to be $1.2 Billion.

2008: Public is deluged with city, union and Hannemann campaign “Light Rail” commercials, emails and letters, and a 50.6% “victory” is obtained.

2008: More political maneuvering and the route goes back via the airport. Warnings that it violates Federal Aviation Administration rules are ignored.

2009: Construction will start at the end of the year. (Isn’t it still 2009?)

2009: Rail is insolvent – Inouye joins the rail party. Feds are now claimed to pay $1.55 Billion.

2009: We lost the EPA lawsuit and appeal. We are now $1.2 Billion in the hole. But ignorance is bliss.

2009: Desperate for good news. Hannemann: “Rail creates 10,000 jobs!”

2009: UH Economic Research Unit: Rail might create up to 2,000 jobs in its peak year. (Given that all rail technology and materials need to be imported, I estimate that Local Jobs will be no more than 1,000 per year.)

2009: In November Hannemann declares that he is willing to wait a month or two to iron out some details; 6 months later his iron is not working.

2010: City steals $300 Million from future TheBus capital investment to balance TheRail budget.

2010: Four years after the Alternatives Analysis and three years after the start of tax collection this proposal has no environmental clearance, no cultural resources clearance and no robust budget.

2010 (May): FTA Administrator Peter Rogoff makes a strong anti-rail, pro-Bus Rapid Transit speech before the Boston Federal Reserve.

• "... last year we conducted a study at the request of a number of legislators that asked us to look specifically at conditions of our largest rail operators. That report takes on particular significance in our department since one of the legislators that requested that report was the then-Junior Senator from Illinois, Barack Obama. The report revealed a backlog of deferred maintenance at our seven largest rail operators of no less than $50 billion dollars."
• "...the majority of transit trips taken in America are still done by bus. In fact, Americans take 21% more bus trips than rail trips. But when it comes to replacement, the costs associated with replacing rail eats up three quarters of the $78 Billion backlog."
  

2010: The cost is up to $5.4 Billion not counting the expensive Airport Runway avoidance. Hannemann really needs to get off this train.

2010: Hannemann did get off the train and run for governor, and lost in the primary. At the same time the author came third in the race for mayor to replace Hannemann. City prosecutor Peter Carlisle won the 3-way race with 39% of the vote. He immediately went to meet with the FTA to declare his commitment to the rail project.

2010: Outgoing Governor Linda Lingle releases an independent financial analysis of the project by IMG. It concludes that (1) construction cost will likely be $1.7 Billion more than the city's advocacy estimate of $5.4 Billion; and (2) based on a 30 year outlook, the total annual project cost will be $310 million per year (best case) and nearly $500 million per year (worst case.) For comparison, the FY 2005 entire CIP budget for Honolulu was $300 million*.

2010: Carlisle is "not worried" about the report and he dismisses it. However, the pro-rail Star Advertiser urges caution for the first time since 2004: "The release last week of a financial analysis commissioned by Linda Lingle during the waning months of her administration added another fear factor to the already scary $5.5 billion price tag for the 20-mile elevated rail project."




(*) Note I use FY 2005 because that was a clean and normal year for Honolulu with no special assessment for sewers and budgeting for rail.

Fidell Urges Traffic Relief

Jay Fidell's blog post "the traffic honeymoon doesn't last forever" calls for the new mayor to address traffic congestion.

Fidell suggests that we need modern solutions - timed lights, sensored intersections, overpasses, underpasses, HOT lanes. We’re desperate for these things. The technology is there, but we ignored it during the Hannemann years. Surely, we learned something and have higher expectations now.

Unfortunately, as Fidell knows, the new mayor is focused on the rail and its $310 million per year bill for 30 years. That's if the project is ever started and if everything goes perfectly well for it. At the same time he is facing a $100 million budget shortfall and a ~$5 billion sewer consent decree with the EPA.

The new mayor gloats on TV that "he is not worried" while surrounded by the perfect storm. Asking him for synchronized traffic lights is simply too much.

The report is out. People get it!

Poll results have been steady for about 10 hours straight so the bias by rail proponents or opponents, if any, is small. People get it!



Scource: KITV.com survey on December 6-7, 2010.

Two Financial Risk Analysis Clearly Show Honolulu Rail Project is Unaffordable

First was the 2009 Jacob's risk analysis report commissioned by the FTA. It said this:

At the present stage of pre-Preliminary Engineering, one can be 90% confident that the proposed project will cost between 5.2 and 10.2 billion dollars (Figure 1-1, page 1-10 of Jacobs report.) Once PE is done and the project enters Final Design, then its price tag is expected to narrow: The project will have a 90% chance of being built for a budget ranging between 4.8 and 8.1 billion dollars.

Read more here: http://fixoahu.blogspot.com/2009/07/jacobs-report-for-honolulus-proposed.html

In December 2010 Gov. Linda Lingle released state-funded study on the costs of rail. The Star Advertiser summarized it as follows:

The proposed 20-mile rail transit system is likely to cost the city an additional $1.7 billion over the next 20 years, raising the total price tag to at least $7 billion, according to a state review of the project's finances. And there is "substantial risk" that the $1.7 billion additional cost could grow to $4.5 billion.

Read more here: http://www.staradvertiser.com/news/20101203_Cost_will_balloon_rail_report_finds.html

My take quoted in the Star Advertiser is this:

Prevedouros said the analysis was consistent with the 2009 Federal Transit Authority report prepared by the Dallas consulting firm Jacobs Engineering Group, which placed the estimated cost of Oahu's 20-mile system at $5.29 billion but also indicated that there was a chance that the cost could reach or exceed $8.1 billion.

"(Jacobs) did not have a stake in the game. They were just reporting a number," Prevedouros said. "They're experts in getting it right, and they said there was a high chance of overruns. I would trust them more than I would trust advocates of the project."

Prevedouros said the results of the latest analysis should give lawmakers pause as they consider whether and how rail should proceed. "It's a different Congress. This will give them pause. It's a perilous path heading forward."

Read more here: http://www.staradvertiser.com/news/20101203_Train_opponents_cheer_prediction_of_cost_overruns.html

It is important to mention the impeccable reputation and expert subject knowledge of the primary authors of the report prepared by Infrastructure Management Group, Inc. Steve Steckler is Harvard University planner and chairman of IMG with past service in the U.S. DOT. Thomas Rubin is a mass transit consultant who's served as Controller-Treasurer of the Southern California Rapid Transit District, now known as Los Angeles Metropolitan Transit Authority.