News Flash: Driving is A Lot More Expensive Than You Think

I’ve been banging on the subject of higher gas taxes for awhile now, but haven’t really offered a whole lot of numbers. Well, thanks to the good people over at the Victoria Transport Policy Institute (VPTI), I now have some estimates. Check out their 500+ page report entitled “Transportation Cost and Benefit Analysis” here.

Importantly, they distinguish driving costs into three categories: internal variable, internal fixed, and external. “Internal” means they are borne by the driver himself, external by others; while “variable” means costs go up as you drive more, while “fixed” means costs stay the same no matter how much you drive. Therefore, “internal fixed” influences how many cars you buy, and “internal variable” influences how much you drive them.

Unfortunately, “external” conservatively represents over a third of the costs associated with driving: “internal variable” is 37 percent, “internal fixed” is 28 percent, and “external” is 35 percent. Which means that for every dollar a driver spends to own and drive his car, others bear an additional 54 cents (35% divided by 37%+28%). Which means we have far more driving than is socially optimal.

Even worse, many of the categories associated with “internal” costs are things many drivers don’t think about, so to the extent they discount them in their heads, what they think is their cost of owning and driving a car is even less than what it really is. Consider these 23 (!) costs associated with transportation:

• Vehicle Ownership Fixed costs of owning a vehicle. (internal fixed)

• Vehicle Operation - Variable vehicle costs, including fuel, oil, tires, tolls and short-term parking fees. (internal variable)

• Operating Subsidies - Financial subsidies for public transit services. (external fixed)

• Travel Time - The value of time used for travel. (internal variable)

• Internal Crash - Crash costs borne directly by travelers. (internal variable)

• External Crash - Crash costs a traveler imposes on others. (external variable)

• Internal Activity Benefits - Health benefits of active transportation to travelers (a cost where foregone). (internal variable)

• External Activity Benefits - Health benefits of active transportation to society (a cost where foregone). (external variable)

• Internal Parking - Off-street residential parking and long-term leased parking paid by users. (internal fixed)

• External Parking - Off-street parking costs not borne directly by users. (external variable)

• Congestion - Congestion costs imposed on other road users. (external variable)

• Road Facilities - Roadway facility construction and operating expenses not paid by user fees. (external variable)

• Land Value - The value of land used in public road rights-of-way. (external fixed)

• Traffic Services - Costs of providing traffic services such as traffic policing, and emergency services. (external variable)

• Transport Diversity - The value to society of a diverse transport system, particularly for non-drivers. (external variable)

• Air Pollution - Costs of vehicle air pollution emissions. (external variable)

• Greenhouse Gas Pollution - Lifecycle costs of greenhouse gases that contribute to climate change. (external variable)

• Noise - Costs of vehicle noise pollution emissions. (external variable)

• Resource Externalities - External costs of resource consumption, particularly petroleum. (external variable)

• Barrier Effect - Delays that roads and traffic cause to nonmotorized travel. (external variable)

• Land Use Impacts - Increased costs of sprawled, automobile-oriented land use. (external fixed)

• Water Pollution - Water pollution and hydrologic impacts caused by transport facilities and vehicles. (external variable)

• Waste External - costs associated with disposal of vehicle wastes. (external variable)

So if you ask the typical person how much it costs for them to drive, they might just think of gas, which at today’s prices is something like 8 cents a mile. Others might know, for tax or expense report purposes, that the IRS number for 2008 was 50 cents a mile. But factoring in all those costs above, the VPTI report conservatively estimates the number to be about 80 cents a mile for the average car and $1.00 for a SUV.

When you think something is 40 to 90 percent off, you tend to buy more of it. And that’s what’s happened with driving. And, as noted above, most of the cost is not borne by each driver unknowingly; it’s borne by society in very painful ways, whether bodily injury, lost time, environmental degradation, or inefficient land use patterns.

When gas shot up to $4 a gallon last summer, all sorts of rational behavior starting emerging. People made choices to take transit, carpool, and bundle errands. Some even bought fuel-efficient cars or moved away from isolated, auto-dependent places. Sadly, much of that behavior has evaporated as gas prices plummeted. Remember that at $4 a gallon, the per-mile cost is about 20 cents a mile. If you had in your mind that driving actually cost four to five times more than that, you might make even more drastic changes to your life.

Until we figure out how to price driving more accurately, those sorts of behaviors are not going to become commonplace. And we will all be worse for it, economically and socially and medically and environmentally.
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