gas prices | Online Savings Blog

How Savers and Consumers Differ On Gas Prices
08.27.08 | Consumerism | 0 Comments | by Fred Siegmund

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The price of gasoline divides America into savers and consumers like no other issue.

The biggest differences between savers and consumers come in their attitudes toward energy policy. In his book the Age of Turbulence, Alan Greenspan wrote at the end of the energy chapter: "I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil."

If it is true, it is a policy: war for oil. I have never had anyone say that to me, nor have I heard any politician or major news service advocate, or try to justify, war as an oil policy.

It does illustrate the contrasts of savers and consumers on policy because it is the ultimate consumer policy: plentiful oil must be available no matter what.

Expanding Energy Supply is a Priority

American policy has been mostly consumption policy because it emphasizes production. Drilling for oil is a production policy, but so are wind energy and solar energy.

Those who advocate off shore oil drilling want to expand supply, but those who want to expand wind energy or solar power also want to expand energy supply.

The oil drillers often argue with the advocates of wind and solar energy, but the argument is over environmental policy and relative cost.

Both sides are saying technology will allow us to have the energy we need or want at reasonable prices.

Savers Limit Gas Usage No Matter the Price

Alan Greenspan suggests a policy of "… significantly higher gasoline prices to wean us off gasoline-powered motor vehicles."

That pressures people to save fuel, but unless savers have some way to cut their consumption by as much as the percentage increase in price, it will cost them much more. That is why savers want to limit the gallons they use no matter the price.

Savers know gas mileage for cars can be much higher and they want to mandate automobile mileage standards so that everyone has the choice to use less energy and save money. They want to expand rail service and have less air travel because rail uses less energy per passenger mile.

Savers look for ways to reorganize physical space so that people can live closer to work and shopping. They look for ways to make it cheaper to move closer to work: a tax deduction for all moving costs, for example.

Notice that Congress has many ways to compromise on policy. A little more off shore drilling can be traded for higher automobile mileage standards.

America needs policies that save energy and money.

Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com
Should You Sell Your Gas Guzzler to Save Cash?
06.11.08 | Consumerism | 0 Comments | by Fred Siegmund

I just heard a story on the TV about a guy who wants to sell his gas guzzler and get a high mileage car to cut his gas bill. Trouble is he owes $8,500 on his car loan and all he can get for his guzzler is $3,000.

He loses $5,500.

As all good savers know, he should only sell if he can save a minimum of $5,500 plus interest. According to the United States Department of Transportation, the average passenger car travels 12,400 miles a year and gets 22.4 miles per gallon for gas. That works out to 46 gallons of gas a month with a monthly fuel bill of $184 if we use $4.00 a gallon for the gas.

I regret to say that is probably low, but we will go with it.

Double his gas mileage and he saves $92 a month. Figure a savings of $92 a month for 5 years at 4 percent interest, and the savings is $6,119.84. Sad to say, but the $5,500 he loses would also accumulate interest. If we use the same 4 percent interest over the same 5 years, the total he loses is $6,715.48.

He loses $6,715.48 to save $6,119.84; a net loss.

This particular comparison does not account for the price of the new car, only the loss on the trade. If we assume he is going to own a car, either an old one or a new one, the premature trade represents the loss from not using the remaining life of the old car, which I hypothetically set at 5 years.

Different interest rates or time remaining for the life of the car will affect the result.

However, the most important comparison is the price of gas. Using $5.00 a gallon with the same mileage and interest rate, savings will hit $115 a month with a total of $7,649.80. At $5 a gallon, he can save doubling his mileage. He should trade the car. For those with mileage over the average of 12,400, saving gas money also will be more likely to pay.

I did the calculations on MS Excel using the FV, future value, function. It has a help file. Try it yourself for your exact situation.

Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com
Is Chrysler's $2.99 Gas Worth It?
05.13.08 | Consumerism | 3 Comments | by junger

Have you seen Chrysler's ads for 3 years of $2.99 gas when you purchase a new car?

Autoblog has the details:

With gas prices rapidly approaching and exceeding $4 a gallon across the nation, Chrysler is offering up a deal that just might make people who are averse to the looks of cars like the Chrysler Sebring and Jeep Compass think twice. Between now and June 2, anyone who buys any new Chrysler, Dodge or Jeep vehicle will be able to register for a "Let's Refuel America" card. Once the customer registers a credit card with the program, they will receive a new card that they can then use at participating gas stations to fuel up their new car or truck. When the card is used, the credit card that the owner has on file will be billed $2.99 a gallon for either regular gas, E85 or diesel fuel. Chrysler will pay the difference. The best part is the price is locked in for THREE years.

Obviously, this isn't as good as it sounds. Nothing in life is free — everything has a catch. Especially something has "too-good-to-be-true" as this.

Freakonomics weighed in, saying it's a brilliant move by Chrysler because consumers overreact to the price of gas.

I believe consumers systematically exaggerate the importance of gas prices to their budgets. The typical American just doesn’t spend that much money on gas.

The way we buy gas — every week or two, with the prices staring us in the face as we stand at the pump — makes price fluctuations far more visible than for other goods. Someone who signs up for this program will think about Chrysler and how they are paying part of the cost of the gas every time they fill up. I suspect that will increase the brand loyalty of people on the program.

I don't know about you, but I wouldn't be persuaded by this offer. Maybe I'm in a different boat than you, because I work at home and only have one car (that gets great gas mileage).

Would you buy a Chrysler to get $2.99 gas for the next 3 years?
A Cheaper Car Will Protect Against Increasing Gas Prices
05.01.08 | Consumerism | 0 Comments | by Fred Siegmund

I recently saw an article in the Washington Post titled "Price of Gas Hits 23-Year High."

Not surprising, right?

Except the article was from May 15, 2004, or almost exactly four years ago.

The 23-year high price was cited at $1.95 a gallon. The article had a breathy tone and warned Americans that summer driving was sure to see $2.00/gallon gas.

Since I just paid $3.51 a gallon for my last gallons, the former 23-year high sounds like the kind of bargain I will never see again.

The price increase of $1.56 in 4 years works out to an average increase of $.39 a gallon per year.

Let's take a look at what that means, using the Bureau of Transportation Statistics' reports on annual average miles traveled per passenger car and average miles traveled per gallon of fuel consumed.

Convert to months and divide the miles by miles per gallon and the result equals 46 gallons: the average gallons for the average car for the average month. Use the $.39 a gallon increase on 46 gallons and the average monthly fuel bill went up $17.94.

The depressing part though is that the increase is cumulative; in the second year, it's $35.88 a month and so on. If these extra payments for gas went into the bank each month starting in May 2004 and earned 4% interest, the amount after 4 years comes to $2,283.88. Ouch!

You can think of it as a loss, or if you are a real saver, you will think of it as a challenge. Probably you have thought of driving a more fuel efficient car, or living closer to work, or just driving less. You could also buy a cheaper car.

Suppose you were buying a car in 2004 and you bought a car a year older, or two years older, than you originally planned and saved $1,946.71 on the deal. Let those savings earn 4% interest compounded over the 4 years and you would have the exact money you lost buying that expensive gas: $2,283.88.

There you have it. Save your gas money, buy a cheaper car.

If you want to know how easy that is go to a website like Carmax.com and look at model prices for 2005 and then back up to 2004, 2003 and 2002.

Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com

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