Show Me Institute : Fuel Prices Falling, Along With Planners’ Expectations

At the time this was written, the average price for a regular gallon of gas in Missouri was $1.859. The price at the same time last year was $3.018. Fuel prices falling nearly 40 percent over 12 months is an unexpected windfall for Missouri families, with a hypothetical household getting an extra 2.75 percent raise off of savings at the pump. It is also likely to mean lower prices for nearly all goods and services, as lower fuel prices mean items can be produced and delivered for less.

While low fuel prices may give an unexpected boost to the economy at-large, they confound the expectations of city and state planners. Whether the source is the Mid-America Regional Council (MARC) (the Kansas City area planning agency), the Missouri Department of Transportation (MoDOT), or East-West Gateway (the Saint Louis regional planning agency), they all expected rising fuel prices to continue into the future. For example, in MoDOT's October 2014 Financial Snapshot, they figured gas would average $3.26 in the upcoming year.

None of this is to blame these agencies for failing to predict future gas prices. The price of oil is historically volatile, and few predicted prices to fall as they have. What these government bodies should be faulted for is using what was at best an educated guess about the direction of gas prices as a standard plank in their arguments for billions of dollars of state and local investment in alternative transportation and restrictive land-use policies. For example, MoDOT used the trend in fuel prices as part of its argument that they needed the ability to fund billion-dollar passenger rail lines as well as support urban transit. MARC predicted that rising gas prices, along with other trends, would "demand for more walkable, transit-friendly development closer in." This is part of their reasoning for recommending regional densification and urban refill.

Regional planners have consistently made the argument that citizens will increasingly use public transportation and live in denser environments, due in part to more expensive fuel. But instead of waiting for these markets to materialize and responding to steadily rising needs, residents are asked to spend billions today to meet uncertain demand down the road. What the precipitous fall in oil prices should remind us is that long-term predictions can be mistaken. While the estimates themselves may be prudent, using them to speculate with public dollars is not.