High Petroleum Prices Not all Bad

This blog has in posts such as this lauded the decision by the former mayor of London in introducing a mechanism for charging vehicle owners for use of roads inn central London. As stated in on of the many posts here, the idea was not only successful, but it was was widely copied. The former mayor's counterpart in New York however failed in securing approval to introduce road pricing within Manhattan. This NYT piece now argues that the rise in the prices of gasoline seems to be having effects proximate to mayor Bloomberg's intention. William Neuman reports that the Metropolitan Transport Authority confirms that traffic reduced by 4.7% as a response to the price of gasoline passing the price of US$ 4 per gallon. Evidence for the claim that the rise in price is responsible for the changed behavior finds support in the concurrent increase in public transport.

Interesting as this unintended consequence of an increase of prices may be, it is still relevant that the effect is a reduction that is not confined to the more congested roads and bridges as the mayor's congestion programme had intended. Thus, the rise in gasoline prices affects all motorists in the same manner as it cannot be targeted to the most congested streets. the limits of the unintended consequence is also that any reductions in price would probably reverse the trends. Most important though is that the gains from congestion pricing are not only in the reduction of traffic and its effects on pollution but also that the revenue generated could be utilized to maintain infrastructure. this advantage is clearly not possible when reduction in traffic is driven by the rising prices of gasoline.