Editorial: Gas prices and housing crises have teamed for economic troubles before

Fuel for thought on the brink of $5 per gallon.|

$4.99 a gallon just doesn’t cut it at some gas stations. That’s nearly what some North Bay Shell stations are charging. But, in fact, the highest we’ve seen this week has actually been $4.99 and 9/10 a gallon.

Apparently, local station operators are working under the theory that some drivers will pay anything as long as they don’t think it’s $5 a gallon.

One-tenth of a cent isn’t merely a fraction of a penny – it’s a frame of mind.

Still, $4.99 and 9/10 per gallon is a lot of dough to travel 20-odd miles. And it’s plenty more than it was a year ago. Heck, three months ago.

Even the California Energy Commission, in a letter to Gov. Gavin Newsom recently, is decrying the “highest increase ever seen” between California and national gas prices.

With petroleum production at normal levels and no other explanation for the sudden price shock at the pump, the Commission concluded it “may be an effort of a segment of the market to artificially inflate prices to the detriment of California consumers.”

That’s the energy commission’s polite way of accusing the oil industry of price gouging Californians.

But that couldn’t be further from the truth, says the Western States Petroleum Association, which exists to lobby on behalf of the oil industry for higher gas prices and lower consumer protections. The WSPA is blaming the historic price hike on California’s higher taxes and stronger pollution standards. Which is odd because, according to the Associated Press, a typical difference the last five years between our state and national prices is between 17 and 34 cents a gallon – and the taxes and emissions standards we have now, have essentially been in place since then.

So it raises a question: Why have the oil companies suddenly in the past year felt emboldened to so brazenly gouge Bay Area consumers?

Here’s a theory, in two words: Housing crisis.

With housing prices in the Bay Area through the roof, workers, and even professionals, seeking mortgages and leases they can afford are moving farther away from the city job centers, creating a diaspora of nine-to-fivers whose commute-culture lives are largely dependent upon substantial amounts of unleaded-plus.

And if John Q. Dogsbody’s morning involves a 90-minute slog from Second Street West in Sonoma to Battery Street in SF, he’s not shopping around to replenish his tank at a station with an 87-octane under $3.99 – he’s filling up at the nearest pump at whatever price and hitting the road.

The oil companies are fully aware of this; the Shell station is charging $5 a gallon because it knows it can.

But here’s what interesting – and more than a little unsettling. A similar spike in gas prices was taking place just prior to the economic collapse of 2008; it, too, was coinciding with skyrocketing home values in what later became known as the “housing bubble.”

Recall: Then-President George W. Bush’s regrettable “that’s interesting; I hadn’t heard that” response to a reporter’s suggestion on Feb. 29 of 2008 that gas prices were hitting $4 a gallon. But that particular fortunate-son out-of-touchness paled only in comparison to Bush Jr.’s surprise 16 days later when Bear Stearns brokerage firm collapsed, ushering in the Great Recession as we knew it – four years of job losses, shattered businesses, plummeting stocks, wage stagnation and the general austerity that comes with the foreclosure of the “American Dream.”

Freakonomics.com – an online site inspired by economists Steven Levitt and Stephen Dubner’s books about the “hidden sides” of economic phenomena – examined the chief causes of the 2008 economic meltdown and concluded that the housing mania of the early 2000s led to a “drive till you qualify” mentality, in which buyers would settle farther and farther away from their work centers if it meant they could land a mortgage. The resulting long commutes and increase in traffic, coupled with at-the-time unprecedented gas prices, tipped many household budgets over the brink, suggests Freakonomics, snowballing into delinquent mortgages and then… well, you know the rest.

Did we mention people today are once again desperate for housing and gas just hit $4.99 and 9/10 per gallon?

As 20th-century writer-humorist E.B. White once observed, “Everything in life is somewhere else – and you get there in a car.”

In many ways that’s still true. And so perhaps the question we should be asking is: Are we headed for another cliff?

Email Jason at jason.walsh@sonomanews.com.

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