Implications to Commuters

Oil prices influence also another aspect of real estate - its location. The costs of transportation also increase because of a high price of gasoline. The development of the oil price will influence every means of transportation - private car, public bus, train, taxi or other. The only way to become independent from gasoline prices is to walk or use a bicycle for commuting. But the majority of the people uses cars and cars use gasoline, which rapidly becomes more expensive. Higher prices of oil may limit the interest of people to drive, as it becomes too expensive. Late June 2008 the price of a gallon (3.8l) of gasoline in the USA was approximately $4 -a little more than 1 dollar for a litre (http://www.eia.doe.gov/oil_gas/petroleum/ data_publications/wrgp/mogas_history.html). In June 2004 this price was half as high and in June 2002 one third. The International Energy Administration states that the average use of gasoline in the USA is approximately 7l per car per day (International Energy Administration - 2008 Annual Energy Outlook. June 2008). Thus, each car spends about $ 7 per day for a gasoline, which is more than $ 200 every month. But 7l a day is an average, including the consumption of people who rarely use their car and including cars of people from little towns, who drive only several kilometres a day. Far more relevant is the question how much a New York suburb resident, who works in the business centre or in a supermarket in the city, pays for gasoline every day. People, who use 20-30l for commuting, are far more common. These people spend $ 600-800 on gasoline every month. What do they need to pay if a barrel of oil will cost $ 250?

What are the possible effects of this situation? The car industry may face a real challenge, one such as GM faced during 2007, losing around 40 billions due to sales decreases. But this is not the only effect. The other - the more important one - is that it becomes ever more significant where you live, how far you are from your office and how much you pay for your transport to and from the city. For a person who lives in a small town around 30 km away from New York City and who works in the city and earns $ 5000 a month, it is more than inconvenient to spend $ 800-1000 for commuting. $ 1000 equals a mortgage loan interest payment each month for a $ 200000 loan from a bank at an incredibly favourable 5% a year for 20 years. The price for gasoline can be compared to the same sum of money you pay to the bank as a mortgage loan interest. It is a very interesting picture, because you indirectly pay a double interest cost for your house - to a mortgage structure and to a gas station.

The first study on this issue will be carried out in the Netherlands soon. For the province of Groningen the first version of a transport map (Fig. 6.4) depicts the socio-economic consequences of rising oil prices in a spatial way. The map visualises that certain regions, which are farther off from the central city, will face serious trouble. In these areas it will become too expensive to commute to the city on a day-to-day basis. This will affect real estate prices and migration from these places. The collapse of these areas, which in the case of the Groningen province are already relatively unfavoured sites for living, may be a serious issue for the coming years. The fact hat this has severe consequences for lower and middle class people makes it an important political issue.

Fig. 6.4 A map of the province of Groningen, spatially showing the socio-economic effects of travelling distances to and from the city of Groningen (Source: Roggema et al., 2008)

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