Rural areas hit hardest by high fuel prices
June 10th, 2008 by Jim JustAn article in The New York Times reports that high gasoline prices are hitting hardest in rural areas of the South, New Mexico, Montana, Wyoming and North and South Dakota. The same forces are at work everywhere, including here in Oregon – we can expect to see high gasoline prices hit rural areas the hardest.
The disparity between urban and rural areas is a matter of simple economics. People in urban areas make more money, drive shorter distances to work and other destinations, and have other transportation options such as public transit. Consequently, they spend a substantially smaller percentage of their household income on transportation. The disparity can be great – the difference between 2% and 15% of family income.
People living in rural areas are in a difficult situation.
“. . . little public transit is available and people have no choice but to drive to work. Since jobs are scarce, commutes are frequently 20 miles or more. Many of the vehicles on the roads here are old rundown trucks, some getting 10 or fewer miles to the gallon.”
High gas prices could result in population loss in rural areas as people move closer to urban areas and jobs. The high cost of driving will make low-wage jobs even less attractive to workers, especially those who also have to pay for child care. As gas prices rise, working less could be the economically rational choice.
And we’re seeing that high gas prices are impacting the value of exurban and rural real estate. Calculated Risk cites Temecula as an example:
“Temecula is a fairly isolated town (see map), and the city is very dependent on construction and/or long commutes. The combination of the housing bust, plus high oil prices, is hitting exurban towns like Temecula very hard.”
And Bloomberg has an article, Wealth Evaporates as Gas Prices Clobber McMansions, SUV Makers:
“‘At $4 per gallon gas, $125 per barrel oil and $10 per million Btu natural gas, a lot of activity becomes uneconomical,” says Mark Zandi, chief economist at Moody’s Economy.com . . .
“The lifestyle of the exurban commuter may be one casualty.
Emerging suburbs and exurbs — commuter towns that lie beyond cities and their traditional suburbs – grew about 15 percent from 2000 to 2006, nearly three times as fast as the U.S. population, as Americans moved further out in search of more affordable houses or the bigger ones that are sometimes derided as McMansions.
“‘It was drive until you qualify” for a mortgage, says Robert Lang, director of the Metropolitan Institute at Virginia Tech in Alexandria, Virginia. “You can’t do that anymore. Your cost of transportation will spike too much.”