Gave a talk this AM at the New American Foundation, commenting on their Energy Trap project. It’s a fascinating research effort to gain a more granular understanding of how folks deal with the costs of getting from here to there, including gas, cars, insurance, and transportation in general.
Check out this remarkable graphic. Each circle represents a state and the y-axis is the price of a gallon of gas. The size and color of the bubbles represent the share of monthly income that households in the state spend on gas.
The graph is dynamic. Click the play button and you see the shares move up and down and change with gas prices (you can even make it do log (i.e., percent) changes and get it to show ranges of price changes (by clicking “trails”–though my computer pretty much barfed when I tried that). You can also click on any state and its name will pop up so you can track it.
There are at least two stories told by this figure. First, demand for gas is inelastic, meaning that people tend to be pretty unresponsive to price changes. If households bought less gas when the price went up, i.e., if their response was “elastic,” the color and size of the bubbles wouldn’t change. But they do, meaning that when the price of fuel goes up, families are increasing the share of their household budgets spent on gas (and spending a smaller share of other stuff).
The other story is about the magnitudes of these shares. According to BLS data, middle-income households spent 4.8% of their after-tax on gas in 2010 (and 16% on transportation in total). But as you see, these bubbles get a lot higher than that when prices rise. As the text reveals, some households saw shares nudging up to 20%.
Check out the political/policy ideas from the Energy Trap team to deal with this challenge.