South Dakota 15th for Dependence on Gasoline

As you commute across South Dakota's wide open spaces this morning, you probably won't be surprised to learn that we South Dakotans spend more of their income on gasoline than many other Americans. In this report from March 2010, the National Resources Defense Council calculates that the average South Dakota driver spends over $1600 a year on gasoline. That's 4.3% of our average income.

By that score, we rank 15th in the nation, just a tick behind our bigger-spending but also bigger-earning neighbors in North Dakota. Poor Mr. Kurtz and his Montana neighbors rank second in the nation, spending over $2000 a year on gasoline, 5.9% of their annual paychecks. Gasoline eats up the largest chunk of paychecks in Mississippi.

State	Avg % Income spent on gasoline	Avg amt spent on gasoline	Avg income	Rank by gas %	Rank by gas amt	rank by income
Mississippi	6.22%	$1,880.95	$30,240	1	4	50
Montana	5.88%	$2,017.96	$34,319	2	1	38
Louisiana	5.26%	$1,908.72	$36,287	3	3	30
Oklahoma	5.12%	$1,830.77	$35,757	4	5	32
South Carolina	5.06%	$1,638.98	$32,391	5	11	44
Kentucky	5.02%	$1,583.50	$31,544	6	18	49
Texas	4.87%	$1,818.89	$37,349	7	6	26
Maine	4.65%	$1,700.66	$36,573	8	9	28
Georgia	4.64%	$1,595.08	$34,377	9	16	37
Idaho	4.54%	$1,467.33	$32,320	10	22	45
Arkansas	4.52%	$1,459.02	$32,279	11	25	47
Tennessee	4.49%	$1,568.96	$34,943	12	19	35
Utah	4.44%	$1,400.80	$31,550	13	35	48
North Dakota	4.33%	$1,717.29	$39,660	14	8	18
South Dakota	4.32%	$1,626.29	$37,646	15	13	24
New Mexico	4.30%	$1,437.33	$33,426	16	28	43
Michigan	4.20%	$1,436.89	$34,212	17	29	39
Kansas	4.13%	$1,585.31	$38,385	18	17	23
North Carolina	4.10%	$1,440.40	$35,132	19	27	34
Wyoming	4.07%	$1,930.68	$47,437	20	2	6
West Virginia	4.06%	$1,311.61	$32,306	21	40	46
California	4.04%	$1,727.67	$42,764	22	7	9
Missouri	4.02%	$1,463.53	$36,406	23	23	29
Iowa	4.00%	$1,486.22	$37,156	24	20	27
Rhode Island	3.94%	$1,622.61	$41,183	25	14	15
Wisconsin	3.91%	$1,461.35	$37,375	26	24	25
Hawaii	3.91%	$1,649.52	$42,187	26	10	13
Ohio	3.88%	$1,383.68	$35,662	28	37	33
Minnesota	3.78%	$1,601.12	$42,358	29	15	11
Alabama	3.76%	$1,257.58	$33,446	30	48	42
Vermont	3.75%	$1,446.03	$38,561	31	26	21
Indiana	3.70%	$1,264.65	$34,180	32	46	40
Virginia	3.67%	$1,264.48	$34,454	33	47	36
Oregon	3.60%	$1,302.80	$36,189	34	42	31
Nevada	3.54%	$1,403.87	$39,657	35	34	19
Arizona	3.53%	$1,188.45	$33,667	36	50	41
Delaware	3.52%	$1,419.34	$40,322	37	32	16
Illinois	3.44%	$1,434.47	$41,700	38	30	14
Nebraska	3.39%	$1,309.37	$38,624	39	41	20
Alaska	3.39%	$1,475.74	$43,532	39	21	7
Florida	3.36%	$1,291.67	$38,443	41	43	22
Washington	3.31%	$1,409.14	$42,572	42	33	10
Pennsylvania	3.27%	$1,315.34	$40,224	43	39	17
New Jersey	3.23%	$1,635.08	$50,622	44	12	3
Colorado	3.00%	$1,266.50	$42,217	45	45	12
New Hampshire	2.96%	$1,279.05	$43,211	46	44	8
Maryland	2.90%	$1,425.42	$49,152	47	31	4
Massachusetts	2.60%	$1,318.18	$50,699	48	38	2
New York	2.56%	$1,216.06	$47,502	49	49	5
Connecticut	2.52%	$1,391.18	$55,206	50	36	1

Spending on gasoline as percentage of income.
Income calculated from given data on percentage and amount spent on gasoline.
Source: NRDC, March 2010

Three interesting correlations pop out of these numbers. First, check out the oil-producing states. Down by the rigs and refineries in places like Mississippi, Louisiana, and Texas, folks are still spending a higher proportion of their income on gasoline. North Dakota has more oil fields than South Dakota, and North Dakotans have similar open-country driving needs as South Dakotans, but they are paying more for gasoline. Alaska defies that apparent relation, paying less than most states for gasoline and ranking 40th on gasoline spending as percentage of income. But I wonder: given that possible relation—or lack thereof—between oil production and spending on gasoline, would South Dakota enjoy any gasoline savings if Hyperion built the Union County refinery?

A more solid numerical correlation: compare gasoline spending as percentage of income with income itself. I run those numbers through my spreadsheet and get a correlation of -0.69. In other words, the poorer the state, the bigger the chunk of income one spends on gasoline. That reflects, perhaps, the inelasticity of gasoline demand: even if you're making less, you still have to drive around. But a lot of those states at the bottom of the list are spending less in dollar terms as well as percentage terms. Places like Pennsylvania, New Jersey, Maryland, and New York also have pretty good mass transit.

One more correlation: the states spending higher percentages of income on gasoline look pretty conservative. The states at the other end of the list look pretty liberal. The point of the NRDC report was to highlight the states that are most vulnerable to oil price shocks. So we could read this data counterintuitively: the conservatives who could benefit most from getting America off its oil addiction and adopting energy policies that would insulate us from oil price shocks are the most inclined to oppose legislation on climate change and energy security that could get us off oil.

Or we could say the above split is perfectly logical: the liberal states are already kicking the gas habit, so they don't mind carbon taxes and other legislation that drive investment in other fuels and raise prices at the pumps they whizz by on their buses and bikes.

Reduce Gasoline Use by Ethanol Subsidy or Gasoline Tax?

Senator Jeff Bingaman (D-NM) wants to end the ethanol subsidy. The chairman of the Senate Energy and Natural Resources Committee says $7.6 billion a year in taxpayer support is unnecessary for "a mature technology whose market share is well protected." Bingaman cites this CBO report that analyzes the cost-effectiveness of the biofuels subsidy at reducing petroleum usage and greenhouse gas emissions.

Note that the CBO study is about the subsidy for all biofuels, but in 2009, 94% of the 11.5 billion gallons of biofuel produced in the U.S. was ethanol.

The CBO report includes some useful numbers on the energy in gasoline and ethanol:

• One gallon of gasoline contains 125,000 BTUs of energy.
• One gallon of ethanol contains 85,000 BTUs of energy.
• You thus need 1.48 gallons of ethanol to get the same amount of energy as you can get from one gallon of gasoline.
• By current techniques, ethanol producers burn 11,000 BTUs of petroleum fuel to produce each gallon of ethanol.
• An ethanol producer thus needs to put 1.69 gallons of ethanol on the market to replace the energy from one gallon of gasoline at the pump and petro-fuel taken off the market to make that ethanol.

Remember: the ethanol credit is 45 cents per gallon (which goes to blenders, not farmers). So the net subsidy to support the 1.69 gallons of ethanol needed to replace one gasoline gallon's worth of energy is 76 cents. Displacing fossil fuels also causes a decrease in excise tax receipts, so the total taxpayer cost for replacing gasoline energy with ethanol energy, says CBO, is $1.78 per gallon of ethanol.

Harvard's Professor Mankiw asks an interesting question: if our goal is to reduce gasoline consumption, might we not do so more cheaply and in a better targeted fashion simply by adding a dollar-per-gallon tax to gasoline and charging those who keep consuming rather than levying additional income tax on all taxpayers?

-----------------------
Bonus note on energy: CBO says that corn ethanol production and use emits maybe 15%–20% less carbon dioxide than gasoline per 125,000 BTUs of fuel made available at the pump. Cellulosic ethanol production and use beats gasoline on CO₂ emissions by well over 80%. In other words, cellulosic ethanol promises one-fifth the carbon footprint of corn ethanol.

China: Car Sales Up, Gas Sales Flat

Folks who disagree with me on the need for strong energy security legislation. This year China has indeed seen its people buy lots more automobiles, but gasoline sales in China have remained flat. Some folks have floated a conspiracy theory, that the Chinese government is buying cars and stockpiling them, just to make it look like the economy is humming. As usual, the reality is less X-Files-y and more mundane:

Kevin Wale, the president of General Motors China, said that automakers knew who was buying their cars and saw no evidence of a car-buying conspiracy. Sharp improvements in fuel economy — partly because of government mandates and partly because of a shift to smaller cars — help explain the slow growth in gasoline sales, he said.

A series of recent increases in regulated fuel prices may have also discouraged some driving, he added [Kevin Bradsher, "An Oddity in China: Car Sales Leap, but Not Gas Sales," New York Times, 2009.12.09].

Check that out: the Chinese are able to increase their economic activity and improve their standard of living (if you consider adding car payments, maintenance costs, and parking fees to your life an "improvement") without a massive increase in realted energy consumption. The Chinese have the will to use technology and regulation to do more with less. Do we Americans?