For someone that writes a personal finance blog and loves driving, you would think I would be more attuned to gasoline prices than I am. My wife can always tell you what the current gas prices are, but I seldom even notice how much I’ve paid to fill the tank.
If you also haven’t been paying attention, gas prices are up almost a full dollar over last year and show no signs of going down this summer, according to USA Today. Before I went to California with my son earlier this month, someone asked me if we would still go “with gasoline prices so high right now?”
I kind of laughed off the suggestion. “How much extra can that be, anyway?“ I thought. Now that I keep seeing gas prices in the news, I decided I would calculate how much gas prices are costing me at this year’s prices versus last year …
Over the course of the year, the higher gas prices (premium grade) are adding almost $1,700 a year to our spending versus last year. That’s not going to break our savings or retirement plan, but I am surprised by how much it adds up to. It’s nearly a ,40% increase from last year!
We drive slightly more than the average two-member household and three of our vehicles have lower than average fuel economy (US Average = 24.9). I’m actually surprised that over its first 1,000 miles, our new Jeep delivers the best fuel economy of our ‘fleet’. It has an electric-assist, 4-cylinder, turbo engine which is super-efficient despite the Wrangler’s giant off-road tires and blocky aerodynamics.
Still, even $32/week of added fuel cost ($1.7K/52) isn’t likely to get me to change much in the short-term. I’ll just add this cost onto my already nagging concerns about consumer price inflation getting out of control. While I think it’s true that some price increases we are seeing in the economy may be “transitory” right now, but I think these fuel prices will “stick” over the longer term due to changes in energy policy.
Are you making any adjustments to your driving or fleet because of the jump in fuel prices? Time for an electric vehicle? Are they any cheaper in terms of total cost to own/operate?
Image Credit: Pixabay; (c) MrFireStation.com
MrFireStation 
I worked with a Leftist MBA type who bought a new Tesla Model 3 who was bragging soon after he bought it that he only spent $45 on electricity charging the car driving from LA to Portland. He made two stops on the way and probably ate while he was waiting to charge.
My fleet has three full size Mercury Grand Marquis and an E350 van. I calculated my cost of gas driving the full size van to cost me around $235.
I then worked out a spreadsheet to teach my sons the finance behind why I drive gently used full sized vehicles. My model compared an acquisition cost of $50,000 [which baked in sales taxes and offsetting government credits] versus my $10,000. I showed on the spreadsheet that fuel is only the tip of the iceberg when it comes to total cost of ownership. You also have costs including oil, filters, brakes, tires and insurance. I also do the majority of my own maintenance to save more money.
My model also treated the $40,000 difference in price between our vehicles as me investing the difference at my normal 10% rate of return.
After factoring in all the ownership costs including the lost opportunity cost of not having $40,000 invested, my comparison ended with the Tesla drivers cost at 65 cents per mile, while mine was under 5 cents per mile.
The Tesla owner and myself are the same age. I live in a much better area and am retired while the other guy continues to slave away.
As a parting comment, I was a passenger in a Grand Marquis that was in a roll over accident a little over two years ago. I was knocked out and med-evacuated via helicopter to a trauma center and woke up under an MRI. The paramedics put a neck brace on me and had me strapped to backboard. The MRI did not find anything and I walked out the trauma center the same day with a bad scratch on my head and a sprained thumb. I would not be here today if I had been in Prius.
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My brother’s wife had a stroke at a younger age and he bought a Mercury Grand Marquis, which he had for many years. It was easier to get her in & out of a bigger vehicle and plenty of room in the trunk for the wheelchair she needed. I agree that fuel economy is a smaller part of the total equation. I haven’t done the math to look at an EV in place of the kinds of vehicles we usually buy.
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I did the math because as an engineer I am interested in finding ways to save money, and I found that people who a changing cars to an expensive car, by my standards, are spending a lot to save at the gas pump.
The story that you told about your brother and his wife is typical of Grand Marquis owners. I have bought three from older owners who certainly weren’t out drag racing them. Two weeks ago I bought a ‘new’ 2009 one for my wife. The car had been serviced exclusively by a Ford dealer so it had complete service records that verified the maintenance and mileage were real on DMV records. It even had new Michelin tires on it which would have cost $800. The car has 77,000 miles and can easily go 300K.
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Wow – you are certainly the King of Grand Marquis! Looks like they made them until 2011, so you only have a few years left. What’s next?
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I used to drive as much as 24,000 miles per year working as a Sales Engineer. Our miles have dropped substantially since my wife and I retired [early]. At 6,000 miles per year, I could easily get 20 – 30 years out of my current fleet. My current might fleet outlast the availability of gasoline or me. If fuel becomes a problem, I will look for what is affordable, safe and reliable. I have no idea what the answer is. My spreadsheets will tell me what my next vehicle is.
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Our fleet average is >30mpg. The prices at the pump are annoying. Always. But not so annoying that I’m falling for the electric scam. Only if I wanted to own a Tesla to drive the world’s fastest production sedan. Yet I don’t want a Tesla. Or search for electric pumps.
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I drive gently used big American cars as in Grand Marquis and an E350 and get much worse mileage than your 30 mpg. My son once asked why we don’t drive higher MPG cars.
I penciled out the numbers. My acquisition cost is a fraction of a Tesla’s which allows me to keep $40,000 or more invested at around 10%. The Tesla costs around 65 cents per mile. My cost after adding back in my investment return comes in around 5 cents per mile [even with horrible mpg].
A little over two years ago I was a passenger in a Grand Marquis that was in a 360 degree roll over accident. I walked away from that accident with a cut on my head and sprained thumb. On a smaller vehicle I probably wouldn’t be here today to enjoy retirement.
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I haven’t done the math to look at total cost of ownership for a EV versus the kinds of vehicles we have been buying. My wife is next up for a new(er) car, but she’s not too interested in an EV. I have to say, when I see the government offering people $$ to buy EVs, I think, “if those cars were that great, the government wouldn’t have to pay you to buy them”.
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I assume you’d say the same thing with regards to child tax credits: “If having kids were so great, the government wouldn’t have to pay me to do it”. 🙂
More seriously, the govt provides incentives for all kinds of behaviors they want to promote, e.g. replacing inefficient appliances, adding solar panels, … Especially when a technology is new and the costs/benefit balance is disadvantageous to the consumer, providing incentives helps create the market so that manufacturers can scale up and reduce costs.
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Before even considering an EV think about their operation in the really cold weather you get in MN. Batteries do not work as well in the cold. After Google searching “Cold Tesla Range”, I got hits from AAA that described owners reporting problems and with temperatures that are not even close to MN.
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We have a few neighbors that have them and most say they are just good as shorter-range grocery getters. I don’t know anyone that has an EV and doesn’t also have an ICE vehicle.
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No changes and no electric cars on this end, but our gas spending is definitely up over last year. I haven’t calculated it yet, but simply mowing the grass costs $50 to fill up my three small gas cans verses what was costing me about $32 for the same three cans a year ago. (It’s sad that mowing is my barometer…I know!) 😆
I’m not overly concerned as we built in lots of room in our budgets to be able to adjust, but if inflation isn’t just transitory and prices continue to rise across the board, it could get ugly for those on tighter budgets. I’ll keep driving (and mowing) like normal for now!
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“Three small gas cans”?! I hope none of those are the poorly engineered new government-designed cans! Those things are ridiculous. I’ve kept my old can for years. It’s just 3 gallons, but that lasts me a month with our suburban lot. How long does it take you to mow each week with a lawn that big?
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Lol! They are the older gas cans (thank goodness!). Living out in the boondocks, I mow about 5 acres of yard, another half mile of driveway (two swipes each side), and about a mile and a half of walking paths winding through our property. It amounts to about two hours with a weed eater and 3 hrs of mowing. Fortunately, I have a large 60” zero-turn Gravely mower that speeds things up, and a New Holland 4×4 33 horsepower diesel Boomer tractor to get the heavier jobs done. (I feel like I need the sound of Tim the Tool Man grunting in the background!) 😆
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Wow – that’s some equipment. Cool to have your own walking paths though. We live on a terrific network of paved city walking paths. They go through our neighborhood and we have a nice 50 minute wooded walk around a big lake and back to our house.
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40% increase is alarming. Although it’s one thing to complain about prices and another when gas is not available at any price. Part of me is mad that we get what feels like gouged at the pump, but part of me thinks if this supply and demand is working like it should those higher prices should prevent it from being unavailable. I am hoping the prices will come back down. Currently demand is up as things open up for the summer driving season we might have to wait until winter to see the prices come back down.
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There’s an interesting article from the Bureau of Labor Statistics that shows how price has practically no effect on demand for gasoline:
https://www.bls.gov/opub/btn/volume-5/mobile/using-gasoline-data-to-explain-inelasticity.htm
The reason, they conjecture, is that most consumption is non-discretionary and there simply are no other cost-effective, widely available alternatives.
The other side of this coin is, unlike inflation is many sectors of the economy, the supply/price of gas is not driven by scarcity or some other physical bottleneck — it’s largely determined by the policy of the OPEC+ countries, who can target specific price points and set supply to match.
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Interesting study. Yep, if there is no reasonable alternative, prices are going to be inelastic. I drove 3 hours yesterday iJeep cruise) and 4 hours today (sports car fun run) for pure pleasure. Even that – which works about to about $7/hour of fuel – is pretty cheap entertainment in my eyes.
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I’m not sure how much real supply & demand exists in the gasoline market. It seems that it is incredibly manipulated by sellers & governments.
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My have a hybrid EV with a 50-mile all-electric range that was my wife’s commute car and is now our “everyday” car. For 95% of the trips we use it for, we use electricity exclusively; the gas kicks in for the other 5%. We fill it with gas (a whole 8 gallons) about 4x per year.
Our other vehicle is a traditional, gas-powered SUV that we use for longer road trips, hauling, camping, towing, … Only 5- 7K miles per year or so, with that mostly depending on if we take a long road trip like your cross-country adventure.
The EV is fun to drive and not going to the gas station is a nice bonus. We charge it at home during the night when rates are very low. The cost per electric mile is about 6 cents as compared to gas, which is currently 10+ cents per mile in CA assuming a very efficient 40 mpg on gas. Plus, for commuting, EVs qualify to use toll/HOV lanes for free with a single passenger (not really an intrinsic advantage of EVs, but certainly a big bonus while still available).
Will we ultimately save money compared to what we could have spent for a comparably equipped all-gas or traditional gas-electric hybrid that gets 40+ mpg? Probably not — there’s certainly a premium to the EVs, and we don’t drive enough to make up the gap. But, as gas prices go up, that gap closes more quickly.
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Thanks for sharing that comparison, Tivolo. It’s good to hear how it ‘really works’ for someone that has both. I haven’t looked at the total cost of ownership for an EV versus and ICE vehicle, but I’m sure I will before our next purchase.
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I only drive 5,000 miles per year 2018 Prius 52 mpg and 1,500 miles per year on wife’s 2013 Honda CRZ 35 mpg. We don’t look at gas prices. I do remember in 1990 price dipped just below $1 gallon. My truck got 12mpg and salary was $35,000. That job pays $90,000 now, but I don’t do it.
My point is that on a relative basis, it is cheaper to fuel a car per mpg per hour worked today.
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That’s not many miles and your cars have incredible mileage. I wouldn’t worry about gas prices either!
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My kids complain about the price of gas, and I admit that when its costing nearly $40 to fill up a tank, it does seem onerous. However, it makes sense to compare to when I was in high school versus minimum wage:
1987: $1/gal and pay $3.35/hr ==> 0.29 hrs work to buy gallon
2021: $3.29 and pay $12.50/hr ==> 0.26 hrs work to buy a gallon
Those numbers are what I remember for back then, and would represent gas price here in suburban NY today.
The other thing that the kids have going for them is that I was driving an 81 Chevy Impala and getting maybe 14mpg. The Honda Civic they drive gets 35+mpg…..
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