Gas prices are near record highs. For those who drive to work, the increase in the cost of gas has not just been noticeable, but a serious eye opener. For Livery drivers, who drive their vehicle for a living, the increase is painful, bordering on unbearable. Unlike areas outside New York City, the typical full time Livery driver drives about 50,000 miles per year.
So, let’s do the math. Assuming a driver works 50 weeks per year, this equates to 1,000 miles per week. Also, assuming the typical FHV that operates in typical NYC traffic gets up to 20 miles per gallon. This equates to about 50 gallons of gas per week. At an increase of approximately $1 per gallon, the average Livery driver is paying an added $200 per month. This is not peanuts and experts are saying prices could continue to rise.
The high price of gas disproportionately affects low wage workers, especially those that drive to work and live paycheck to paycheck, making them unable to absorb price spikes. Livery drivers and other people who operate their own vehicle for a living are practically begging for relief. For those who don’t drive a vehicle for a living, the rising cost of living, including food and other necessities in NYC, has limited their ability to afford to take a car service for transportation.
If sky-high gas prices persist, it will likely have a significant impact on the U.S. economy in general, leading to falling consumer demand for all sorts of services and products, as people tighten their belts to offset the higher cost of daily commutes.
Rising gas prices are mainly the result of severe sanctions by the U.S and its allies that have effectively taken Russian oil off the market. The move has led to the sixth-largest disruption in oil supply since World War II. According to the International Energy Agency, Russia was the world’s largest oil product exporter in 2021.
When gas prices exceed $5 per gallon, the economy tends to experience what’s called demand destruction, whereby consumers and businesses reduce spending because of higher prices. Think of it this way: Goods that are consumed are transported across the country every day. Airlines are increasing costs. Truckers are adding fuel surcharges. Even lawn care companies and mobile dog groomers are upping their service fees.
Unfortunately, Livery drivers do not have the luxury of increasing their fees. The NYC Taxi and Limousine Commission (TLC) mandates that the dispatch base set fees that consumers pay to receive for-hire transportation in NYC. Over the past decade, the Livery industry has been squeezed by massive regulation, which increases the cost of doing business. Livery bases are already operating at very slim profit margins. So slim that they are practically anorexic, which means that for some Livery bases, they are barely making ends meet.
This leaves everyone in a relative state of paralysis. Livery drivers are making less money and can barely afford the necessities for their families to live. Livery bases cannot increase the cost to the consumer because, with the rising cost of living, the average Livery customer can’t afford to pay the increase. Livery bases cannot decrease the fees the driver pays the base because many Livery bases are already on the brink of bankruptcy. So, the question becomes: What is the solution?
I believe the solution is to think now and plan for the long term. The most immediate thing Livery drivers can do is improve fuel efficiency by keeping tires inflated and the engine properly tuned. This can improve a car’s gas mileage by up to 5%.
While the cost of gas and other goods increases, we all have to tighten our belts. It will hurt for a while, but the pain will not last forever. Regardless of the issues overseas, the cost of gas is a function of supply and demand. When demand is high and supply is low, the cost increases.
The April-to-September vacation-driving season often causes an increase in gas prices. Prices tend to fall in the winter because production costs are lower. While the cost of gas is a function of supply and demand, the FHV industry works the same way. When the cost of gas and other consumer goods decrease, the demand for transportation increases. It is the job of the city regulators and FHV industry leaders to plan today for the day when the cost of gas decreases and demand from the consumers for transportation increases.
It is time for the TLC and the leaders of NYC government to give the Livery industry a break. They can do this by planning today to implement the Livery-only FHV license (LO-FHV) in the fall when gas prices are likely to decrease.
In last month’s issue I detailed what a LO-FHV is. It is a license that the TLC can issue and regulate like any other FHV license. The main difference between an ordinary FHV license and a LO-FHV is that the holder of the LO-FHV can only accept dispatches from a Livery base. Thus, Uber and Lyft would not be able to send dispatches to the owner and operator of a LO-FHV. If only a Livery base can send dispatched to a LO-FHV, then the supply of Livery vehicles available would be increased, thus giving bases the ability to meet the needs of consumers when demand increases.
The LO-FHV license will allow Livery bases and drivers to make up the losses they are now experiencing and have been experiencing over the past 4-5 years. The number of LO-FHVs to be issued can be discussed and debated with the TLC, but we know that such licenses will not increase the cost to the consumer and will not cause massive congestion or explosive growth of the number of FHVs on the road.
If someone else has another idea on how to provide for relief and future recovery of the Livery industry in the long term, I am all ears. In the meantime, the TLC must prepare for the future. City regulators must take action now to ensure the Livery industry remains vibrant, so the residents and visitors to NYC, who have come to rely on Livery services, can continue to enjoy those services at a reasonable cost.