And... NPR. Darian Woods...
Weilin Wang... Adrienne Ma?
That's you! The gig's all here today!
And we've got a special episode because it is...
Listener Questions!
This is The Indicator from Planet Money, and we are here with Listener Questions where answer your queries about all things economic and financial in your lives.
So today on the show, why oil prices are down but gas prices are up, why airline lounges have gotten so popular, and whether Canadian carbon taxes actually work.
All that after The Break.
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Alright, let's do questions.
Our first one is for Whalen.
It comes from Michael Locklear.
My name is Michael from Salt Lake City.
What's behind the rapid expansion of lounges under -reward credit cards, and how do they even make sense for the credit card companies?
Okay so full disclosure, I am a Priority Pass Holder.
I get it through a Chase credit card. Damn, okay.
Fancy jet setter whaling.
Maybe, although I feel like the lounge is never in the same part of the airport that I end up in, so I never get to use it.
So in theory you're a high roller?
In practice I am just a schlub.
Yeah. So, Michael had this multi -part question, let's look at his first point.
what is behind the rapid expansion of airport lounges?
So since 2018, travelers have complained that these lounges have gone downhill because of the explosion of these credit card reward programs and with them all of these lounges.
The lounges used to be backed by specific airlines to create loyalty and now credit cards are doing the same thing.
Some people say they've gotten overcrowded and chaotic and they're a lot less fancy.
I mean, at least 10 new lounges are set to open this year.
Several are backed by credit cards.
We reached out to Eric Rosen of The Points Guy.
It's a sponsored credit card and travel website.
And we asked him, what's going on here?
If an issuer is going to introduce a premium card or keep it competitive against the others that are out there, it's got to offer a similar suite of perks.
I mean a lot of the time, what you're selling is exclusivity and that's kind of hard to scale among a lot of people.
It is, but these new lounges are definitely driven by competition.
It's also just air traffic.
So in 2024, people traveled 10 % more on average than in 2023.
The next part of the listeners question was how much do they cost to run and how do they make sense for the credit card companies.
And so did you find an answer?
Yeah. Eric says these lounges definitely cost a lot, but people aren't really milking these lounges for all their worth.
And even if they were, don't worry too much about credit card companies making enough money, they're just fine.
Every time someone carries a balance on that card, they're making a tremendous amount of money, they are definitely not hurting in terms of earning money based on regular, you know, use.
Right, very high interest rates on get a card debt, basically.
Yeah, you'll never eat enough bruschetta or whatever to make up for it while they're spending!
Okay Waylan, one day I hope you achieve your lounge dreams. Next up we have a question for Darian.
My name is Clay Perrin, and I'm from Peterborough, Ontario, Canada.
Could you do a show on how effective or ineffective the carbon tax has been?
Yeah, so it's carbon taxes on both the consumers and industrial emitters, and it went into effect in Canada in 2019, where every ton of carbon dioxide emitted would cost the emitter $20.
That would increase by $10 every year.
All revenue collected went back to citizens.
emissions. A study by the Canadian Climate Institute forecast a pretty dramatic reduction in carbon pollution.
Yeah. You know, I guess the idea was that raising the cost of carbon would push people to lower their carbon emissions rather than paying that extra cost. Right.
So it's been six years since a carbon tax went into effect.
Let's go through what actually happened.
Let's start with the federal government, which says the carbon taxes will play a big part in Canada's overall emissions reduction effort, as much as one -third by 2030.
From economists we spoke to, though, the effectiveness of these taxes aren't so easy to pin down.
Dave Sawyer is the Principal Economist with the Canadian Climate Institute.
It's really hard to disentangle the impact of a single policy on our emissions.
So we have biofuel mandates, we've got EV mandates and subsidies, electric vehicles, vehicle...
What Dave has seen is that carbon taxes have changed behavior, that a lot of consumers are racing to replace furnaces with heat pumps.
Another economist we spoke to also crunched the numbers, he's at NERA, which is a prominent economic consulting firm.
From his analysis, the carbon taxes haven't really moved the needle much. Since 2019, the U .S. has actually reduced carbon emissions more.
But that doesn't mean it hasn't contributed something in Canada.
Sure, it's just that a lot is going against both the consumer and industrial taxes.
On the industrial side, there is a minimal tax.
Provinces and territories are allowed to make up some of their own rules.
That's been leaving room for random exemptions or leakage opportunities.
And didn't the newly elected Canadian Prime Minister, Mark Carney, didn't he axe this consumer carbon tax?
Yeah, he said it will help hard -pressed Canadians.
Dave Sawyer thinks this change will reveal just how effective the tax really was.
We do know that emissions will be higher without it, how much we're not quite sure.
So that's what we're really waiting to see.
Alright, thank you, Darien, for looking into that.
Lastly, we have a somewhat related question, and that goes to you, Adrian Ma.
Hi, this is Rick Weiland from Evanston, Illinois, and I'm perplexed.
The price of crude is plummeting.
The price of gasoline is soaring.
Isn't this counterintuitive?
What's going on with oil?
Rick, I hope we can unplex your perplexity.
You've come to the right place.
Thanks for the question.
So if you look at national data on retail gas prices going from, say, January to now, they've gone from about $3 .19 a gallon to around $3 .30 a gallon, so not a huge increase.
However, during that time, the price of crude oil has dropped a lot, from $80 a barrel to around $60 a barrel.
We ended up reaching out to Javier Blas for some insight here.
Javier is a Bloomberg columnist who covers energy and commodities, and he says there's a few reasons why oil like crude oil and the gasoline you buy at the don't always move in the same directions.
And the first reason is, well, I found this pretty fascinating.
But did you guys know that the gas that you buy at the pump is actually different depending on the season?
They actually have summer grade gas and winter grade gas.
Yeah, one of them's like more polluting, right?
Oh, I thought it was like you can't wear white after Labor Day.
You can't put summer grade gas in your car after Labor Day.
I'm pretty sure that is a part of it, yes.
It's like. It's a faux pas.
Yeah, the the pollution is a factor here.
So during the summer, when the temperatures get really hot, gas can actually evaporate while it's still sitting in your car's tank.
Yeah, I didn't know this, but this summer grade gas is designed to evaporate more slowly.
And Javier says that this makes a difference in the price.
The summer one that we use to reduce pollution in major American cities is a bit more expensive to make, and that explains why the price of the pump station has gone up in the last few weeks.
The other big reason that crude oil and gas prices don't always move together is that well, they're not the same thing.
Crude oil has to be refined into gasoline, and that's costing more right now because something called the refining margin.
That's the profit that a refinery takes when they turn a barrel of crude oil into, say, gasoline.
We have had a number of refinery glitches, particularly in Mexico, in West Africa, in parts of Europe, that means that we are using the global refining capacity a bit harder than it has been in previous months.
That means that the margin has gone up.
Now, Javier says if lower crude oil prices continue longer term, then that will probably translate into lower gas prices.
Well, thank you so much to all of our question askers.
And if you've got a burning economics question you would like for us to tackle, please e -mail us.
We are at indicator at MPR dot org.
That's indicator at MPR dot org.
This episode was produced by Cooper Casper Kim.
It was engineered by Robert Rodriguez.
It was fact -checked by Ciro Juarez and edited by Kakin Cannon.
The indicator is a production of NPR.
