Oil price vulnerability
Russell Degnan

A little while ago, LaborFirst Blog linked to an interesting article on how vulnerable different parts of Australia's major cities are to rising oil prices. The first part of the paper is worth reading as a primer on why oil prices are expected to rise, and current transport patterns. Although, it should be added, there are several controversial topics glossed over with little comment.

The second part concerns locational disadvantage, and more partcularly, the way increases in the price of oil (and therefore) will dispoportionally affect people in the outer suburbs.

To measure this, the authors took a composite of three measures: socio-economic index for areas (SEIFA); household motor vehicle ownership; and car-dependence for work journeys. The map for Melbourne being produced below.

There are two specific problems distorting the measure that I can see. The first is that the SEIFA figures (50%) swamp the car-dependency variables. This means there are patches of vulnerable low-income people in the inner city who really aren't, and patches of invulnerable people in the outer-suburbs who really are -- particularly the Doncaster corridor. It would make more sense to multiply the income and car-based variables, emphasising that the two act on each other, rather than separately.

The second problem concerns the measurement of car-dependency. Both the number of cars per household, and the journey-to-work data are affected by income (with rich people being more likely to have them). Many people who could take public transport and are not vulnerable to oil prices, do not, for time, or other reasons. A better measure -- though still inadequate -- would be the number of jobs that could be reached by public transport within an hour, although this can be difficult to measure.

In a broader sense, the study suffers from how it defines locational disadvantage as a problem. Earlier in the paper, it used this definition by Burnley:

To the extent that people move to outer suburbia to obtain affordable housing, such pricing trends may be socially inequitable unless strong policies to relocate employment and to develop public transport are pursued in tandem.

But reversing this as an issue causes different problems. More services and employment in the suburbs will draw richer people towards them and onto larger lots on the urban rim. If this is at the expense of the inner city, such as in the United States, it won't necessarily equalize service provision nor reduce car dependency. Similar problems occur when public transport is extended further out, as it allows people to find even cheaper land further out again.

Economically, the differential between inner and outer suburban transport costs is less at the moment than the differential to other things that affect the decision to buy a house -- land size, proximity to services. As the transport differential increases with higher oil prices, land will become cheaper in the outer suburbs, negating it. This will cause pain for people who bought housing on the basis of previous conditions, but eventually people will do what they always have done: buy the best housing they can afford in the place they can best afford it.

We can conclude then, that the long term effect of oil price increases will be higher house prices in the inner suburbs as demand for places with cheaper travel increases. It also provides an opportunity for planners, to pursue policies for less car dependency and urban consolidation, in line with (as opposed to against) market forces. And the problem then, as always, is the provision of infrastructure to help make people make sensible choices.

Sterner Matters 17th January, 2006 17:04:27   [#]