Alternative Modes of Transport: Bus

Several weeks ago, I ran a survey relating to modes of transport between Ann Arbor and Chicago. The impetus for this survey was the result of the spiking oil prices, which have receded since then, but are still staggeringly high. Oil has been creeping up for quite some time. Starting from October of 2007, when oil was $92/barrel, the vast increase started to alarm people (Source).

Since then, it has topped out at $141.71/barrel on June 27, 2008. This is the highest price that oil has ever reached, even in real and inflation-adjusted terms. As of today, August 11, 2008 the NYMEX Crude Futures are at $114.68/barrel, a decrease of 19.1%. With this extreme spike in oil prices has come a lot of other baggage along with it.

For instance, while oil was spiking the economy was also dealing with the ongoing subprime mortgage woes that have truly and utterly paralyzed the American economy in my opinion. The growth outlook for the rest of 2008 is projected to be 0.7%, which is a snails pace when you consider the long term growth trends of the US Economy, and especially now when it is trying to keep stride with China and the growing World economy.

Additionally, the rise in oil prices have effected all things from apples to transportation. The price of food has increased along with oil prices, and transportation costs have spiked because they are linked to oil prices, which has meant that all goods that need to be transported (and that's pretty much everything you consume unless you go to the Farmer's Market in Aurora, Illinois) have risen with it.

Increasing oil prices are never a good thing and compounded on the rest of the economy's troubles, this hasn't been the best economic years in recent time for the American economy.

However, with every cloud there is always a silver lining (or at least I remember hearing that in Kindergarten and I hope and pray that this adage holds up). With rising oil prices, one of the major shifts that could occur is in how people commute. National gas prices for a gallon were in excess of $4 at one point, and this severely hurt demand. For the first time in many registered years, the demand for oil in the US declined as a result of the high price of oil. For the first time this century, OPEC has projected a decline in demand for oil by the year 2020 according to their 2008 World Oil Outlook.

People are simply not driving as much, because they just couldn't afford it. It made sense to me that if people weren't going to drive their own vehicles, they would have to turn to some other means in order to get around (I assume that people are productive and will continue to get out of their homes even if they can't drive their own cars).

So, in order to make this idea a little more tangible for me, I broke it down to a lengthy commute that I typically go on and wondered if people would change their habits due to the rise in oil. I wanted to see whether people would consider taking a bus as an alternative mode of transportation from Chicago to Ann Arbor, where the University of Michigan is, or vice-a-versa.

I often perform this commute. It takes about 4 and a half hours to get from one place to the next and its a pretty simple and easy drive to do. However, with the rising oil prices, the cost of the journey each way was amounting to around $54 (I'm assuming a car that can go 20 miles per gallon at a rate of $4.50/gallon). Anyway, that's a lot of money to have to pay, and that only gets you there. You have to pay another $54 on the way back. So a trip from Chicago to Ann Arbor is going to cost the average person $108 automatically.

There's got to be a better way. That led me to think about alternative modes of transportation. I was immediately led to the idea of starting a bus service that goes between Ann Arbor and Chicago. I hadn't really heard of too many before and I thought the idea to be quite novel. Since thinking this idea up, however, I have come to learn that bus services between Ann Arbor and Chicago is not only plentiful with different bus services but also highly competitive. It was a great idea in principal, but its already been explored. However, I wanted to see what people's propensity towards alternate modes of transportation were as a result of the rise in the price of oil.

• Results

I received 17 respondents for this survey. Therefore, I can't call my results statistically significant, but I like to consider them at least an indication of what people may generally do.

The respondents were composed of 10 males, 6 females, and 1 unknown. The average age of respondents was 24 years of age with a mode of 21 years of age.

I first wanted to gauge how many times people actually frequented Chicago from Ann Arbor during a typical school year. Therefore, I asked them how many times they made the trip in a given school year. The average amount was 2.25 times, with a median of 1.5 and a mode of 1. The most times a person traveled to Chicago was 6 times, and the least amount was 0 (answered by 3 different respondents).

The following graph indicates how these people who traveled to Chicago typically get there. As you can see a number of them Drove there, 80%, and the rest of the 20% was split between bus and train. I find it surprising that none of the respondents replied that they take the plane to Chicago. I realize that the journey is only 4.5 hours by bus, train, or drive, but I have taken a plane in the past and its quite pleasant and very fast.

I then wanted to gauge how the price of oil had affected peoples habits in their everyday lives and how it had specifically affected their mode of transport. According to my results, only 6 out of 17 people had had the price of oil affect any of their spending habits. Quite similarly, the proportion of people who responded "yes" to the rise in oil affecting their habits as they relate to their mode of transportation, 7 out of 17 people, agreed that the price of oil was affecting their habits of transportation.

When I first considered these proportions, they didn't seem all that significant, but both are very indicative of the climate and the present state of the economy. I would contend that people don't typically think about the price of oil when they're picking out their Cheerios at the grocery store, or buying a song on iTunes, but apparently that is the case with 6 of 17 of our respondents. Even more significant, is the fact that 7 out of 17 people have changed their habits when it comes to modes of transportation to accommodate the rise in oil prices. If humans are creatures of habit, oil is mighty powerful in changing those habits.

I also wanted to know what price it would take for people to change their spending habits (if they hadn't already). My results indicate that at a price of $5/gallon (mode), people's habits would most likely change when it came to their respective modes of transportation. Our oil prices came very close to making that number a reality, but as of right now they are most certainly on the retreat, and I believe the national average has dropped well below $4/gallon.

I then gauged whether or not people believed that as prices continued to increase for a gallon of gas, if "alternate methods of transport would actually become a realistic alternative to driving their personal vehicle." My results indicate that 10 out of 17 people believe this to be the case. That is a solid majority, and although these results are statically significant, that is an interesting idea to say the least.

Finally, I presented the respondents with a scenario in which I asked them to consider going to a location called Zanzibar, which was a mere cover for Ann Arbor from Chicago (I'm sneaky). The trip was planned on short notice, and I provided them with time, distance, and cost variables for plane, train, and bus. I then wanted to see what most people would do considering these various constraints.

As it turns out, a huge percentage of people would opt for the bus. According to this study, 76% would take the bus, 18% would fly, and 6% would take a train. I find these results a little overwhelming. I want to attribute these results to bias, but I truly believe that if there was an affordable and enjoyable service that got people from A to B in the same amount of time as driving but at a cheaper cost, I really see no reason why they wouldn't go for it.

There are similar services in New York City that go from Washington, DC to New York or vice-a-versa, and that seems to do very well. It is a comparable distance between Ann Arbor and Chicago as it is from New York City to Washington, DC, and I have taken that bus and I enjoyed the ride.

I calculated that a competitive rate for a ticket from Ann Arbor to Chicago could cost anywhere in the range of $20-$30 for a one way ticket on a bus. I'm not sure what competitors are currently offering, but after factoring in bus rental (or lease), paying the driver, insurance, and cost of fuel, a pretty hefty margin can be attained if you charge a person $20-$30 each way. This kills the rate of $54 if you were to drive your own personal vehicle.

However, when giving the option of using one's own personal vehicle as the mode of transportation to Zanzibar, 9 out of 17 people still would opt to drive. This draws on the habit that people have to drive their cars to get around. There are definitely other ways though, and they can be a lot more cost effective, especially today when the economy is slumping and oil is going through the roof.

• Conclusion

The results indicate that people would be willing to take a bus from Chicago to Ann Arbor in order to satisfy their transportation needs on short notice trips. I am not sure as to how this statistic would vary if time were taken out of the equation.

Although the bus became the number one choice of transportation, the advent of one's own personal vehichle still loomed and was far more widely accepted if given that as an option.

In order for people's transportation habits to change, the price of gas will have to soar to extreme heights, probably in excess of $180/barrel for oil and $5/gallon. The bus transport industry can be very effective and profitable if managed properly.