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What To Do About Gas Prices?

Gas prices have gone up more than a $1 a gallon since last June, when I wrote this article about rising gas prices. Prices are up almost $2.25 in the last 18 months (+107%), according to GasBuddy.com tracking. Yikes.

Last June, I estimated that each $1/gallon fuel rise was costing me an additional $1.7k/year, so now I guess we are more than double that … about $3.8K/year, or $74/week.

I’m shocked to see how much that is, although gas prices were pretty historically low before the 2020 Presidential Election, due to the pandemic and other factors …

I looked at a few articles to see what advice they had to cut your fuel costs. Here are the big three ideas I saw mentioned …

⁃ SHOP AROUND – Find a discount station, like Costco or Sam’s

⁃ SMALLER CAR – My best fuel economy is in my Jeep

⁃ DRIVE LESS – I could do a little of that, I average 24K miles a year

Costco gas is about 5% cheaper than my usual station (20 cents/gallon) and my Jeep is 13% more fuel efficient than my SUV. Combined, that lowers my costs by about 18%. That’s less than a fifth of the 107% gas prices have risen.

(I’m going to leave out the option of buying a smaller car or EV right now, since car prices have also dramatically risen. I definitely will be looking at an EV for my next ‘daily driver’. Of the choices today, I’d get a Tesla Model Y.)

That leaves ‘driving less’ as my last option. It looks like I would have to cut my driving almost 90% to get my overall costs back to October 2020 prices. That’s never going to happen for me, or anyone else.

I guess I’ll just grin and bear it, being happy that I can afford the added expense. How painful for families / individuals that rely on their car for work and kids activities. I’m sure these gas prices will make a big dent in their weekly household budget.

Are you going to do anything differently as a result of the latest round of gas price increases?

Image Credit: Pixabay

16 thoughts on “What To Do About Gas Prices?”

  1. I filled up my 1 ton Ford E350 Van yesterday, which I like driving for shopping runs because I get to bring my two large dogs along. They love a good ride almost as much as a good walk. My dogs even get a Costco hot dog for a treat. Before President Xiden got into office, it would cost me around $70 to fill up. Yesterday, it cost $5.27 at Costco which is around 50 cents cheaper than most other places. The total came to around $126. I only fill it up around once per month.

    Ironically I had a woman with a Biden / Harris bumper sticker filling up in front of me. I thanked her for the $5.27 per gallon gasoline and gave her a hearty “Let’s Go Brandon” when she was getting back in her car.

    Expensive gasoline is an investment opportunity. I noticed during the Obumbler administration that the restrictions he placed on the oil and gas industry actually hindered competition in the industry and allowed the oil majors to make nice profits. I got out of oil and gas stocks entirely during the Trump administration when his deregulation created excess competition, which brought down price at the pump and profits. Currently, I am receiving around $19,000 annually in dividends from oil and gas companies, with my average oil and gas holding is up an average of 53%. These gains offset anything extra I am paying at the pump many times over. It played out exactly the same during the Obumbler Administration.

    Here are some thoughts about electric vehicles. Recall that one of my college majors was Electrical Engineering.

    I had a co-worker who was notoriously bad at Math. He bought a new Tesla before Covid-19 broke out and was bragging that it only cost him $45 for the three charges to drive the 900 miles from Los Angeles to Portland. I made a spreadsheet to compare his cost per mile and my cost per mile. I figured his acquisition cost was around $65,000. After baking in repairs and insurance, I estimate his cost at around 65 cents per mile.

    Next, I calculated my cost per mile. I had just bought a very lightly used 2009 Mercury Grand Marquis for $4,500 that rides much more comfortably than a Tesla, by the way. At the time, my gasoline cost was around 3X the Tesla and might be as high as 5X now but you have to remember electricity is going up too. The difference maker is that I have the $60,000 difference between our two vehicle costs invested at my normal rate of return of around 10% annually. After baking this into my model, my cost per mile was a couple cents per mile.

    After posting my numbers in another forum, another poster mentioned that my model left out the replacement cost for Tesla batteries, which is around $20,000 every 100,0000. The gasoline cost at $5.26 per gallon and 15 – 20 miles per gallon driving 100,000 miles is between $25,000 and $30,000. Add 5 cents per mile for Tesla charging will add another $5,000 brining the Tesla’s total energy cost up to $25,000 per 100,000 miles. My energy cost and the Tesla is almost the same after you bake battery replacement cost into the equation. I bet my cost of gasoline does not stay at $5.26 for the next 100,000 miles.

    During the cold months in Minneapolis, batteries do not work as efficiently and you will have additional losses due to heating the interior of your car. You will have to charge your car more often.

    Here are some thoughts on the environmental aspects of electric cars:
    1) Where does the electricity come from? Quite a bit comes from coal, but has been switching to natural gas.
    2) Many of the materials including the batteries are made by China, which uses primarily coal for energy and is the world’s leading polluter.
    3) Modern cars have really cleaned up their act in terms of pollution from the tailpipe. The majority of pollution from today’s vehicles is brake and tire dust. Electric cars are heavier than an equivalent gasoline engine vehicle because of the battery weight. Heavy cars generate more brake and tire dust.
    4) The US is one of the few countries to surpass the targets set by the Kyoto Treaty because it had switched from coal to natural gas electricity generation, because of fracking.
    5) Global warming is a scam. Earth was hotter during the Greek and Roman Empires. They were growing olives in Germany and Citrus in the UK during the Roman times. Greenland was colonized by the Vikings during this period. They had to abandon their colony due to crop failure caused by cooling. I recommend reading Gregory Wrightstone’s “Inconvenient Facts”.

    Despite making a profit off “Let’s Go Brandon” energy policy, I am willing to pass on these gains for the USA to become energy self-sufficient again. USA energy self-sufficiency creates good jobs for US workers, lowers our trade deficits, and avoids funding some really bad actors including Russia, Saudi Arabia, Iran, and Venezuela. Being energy self-sufficient is good defense policy.

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    1. Xiden = 😆
      $5.27/gallon ⛽️- Yikes!
      Oil Investments = Nice
      Tesla = I priced a Model Y last night. $76K + government credit. Still way to high. I don’t have a Marquis, but my cars were all paid for with cash and depreciating nicely.
      Charging = I get mad when I see local governments putting out ‘free charging’ stations.
      EVs = We get our electricity from a coal plant near our house
      Natural Gas = We heat our house with it in Minnesota
      Global Warming = Sure its warming, but it’s not catastrophic. 2 degrees over 50 years? MN changes 120 degrees every 6 months. We’ll adapt.
      Bad Actors = 9 of the top 15 oil producing countries are totalitarian dictatorships.
      Energy Independence = Officially, we still are, but I don’t think it will last.

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      1. Good to see that you are doing the math on the economics of owning a Tesla. So in your case, a Tesla would be a remote coal powered car, and are getting to the main point. Keep driving those nicely depreciated cars for a long time and a lot of miles. It is money in the bank.

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      2. What would get me into a Tesla is the 3.9 second 0-60 performance. I like to save $$$, yes – but I will want to have the fun of that kind of acceleration! Not now, but some day.

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  2. “Restore Energy Independence.” These three words should become the rallying-cry of the party that wants to win 2022 elections. Why? High energy costs that startle us at the gas pump also drive up the costs of all items in our lives. Americans hate inflation. Americans love independence. We have lost the energy independence since 2020 and gained inflation to heights not seen in half a century. We must change party in power.

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    1. I read Senator Scott’s 11 Point Plan over the weekend and it read like a much stronger version of the Contract with America. Energy self-sufficiency was the star of the show. I think energy policy, school choice, bringing down inflation, and keeping the USA out of foreign wars is the winning ticket for 2022.

      Hopefully the last two years have destroyed the Demonrat Brand for a generation of voters, just like Carter did in the 70s.

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  3. I do a lot of mountain and canyon driving and complained one day to my tire shop that I only get around 22,000 miles out of set of good tires with perfect alignment. To make me feel better he told me that he has Tesla owners replacing their rear tires every 8,000 miles. 0-60 in 3.9 seconds goes through tires, especially with the higher torque that electric motors lay down off the line.

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    1. Yeah – I have a BMW roadster that I track, rally, and auto cross. The soft, sticky Michelin Pilot 4S tires go about 12K.

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      1. I bet you would prefer the ride and handling of your BMW roadster over the Tesla. German engineers have master using strong anti-sway bars, not stiff springs, to get around corners.

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      2. Probably so. My BMW sits really low & wide on meaty tires. It would certainly crush the Tesla on a track. Maybe even straight away in a 1 mile drag race. Mine’s tuned up to about 400hp and 400# torque with a sub-5 second 0-60 time. It’s no slouch, but those EVs are so fast off the line with instant power.

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  4. I remember briefly in 1990 gas dropped just below $1 per gallon. At the time I got 12mpg. In 2018 I bought a new Prius and I get between 50-60 mpg but I don’t drive very much. Gas prices have little impact in my life other than investments such as a Master Limited Partnership which pays an 8 1/2% dividend consistently.

    I know someone who tried to get me to buy a plug in Prius, even with a subsidy it still did not pencil out.

    I did buy gas two weeks ago as I was driving 62 miles per day for two weeks and I was shocked at the pump price, but it cost a lot less than it did ten years ago to fill my old Mercedes for the same distance. MPG matters

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    1. This was a great answer to an otherwise troubling set of comments. I look at this blog/followers as some of the most long-term thinking and disciplined. I see comments blaming others on a short-term focused speculative commodity market. It’s an odd short-term take for otherwise long term focused individuals. Pandemics and war screw up lots of things. It’s encouraging to see oil prices falling and a strong economy.

      It does hurt when markets hit the most vulnerable and I’m lucky enough to be in a good financial spot. Given all of that’s going on, the vast majority of Americans (assuming all of us are in the USA) are damn lucky to have our democracy and innovation.

      Good luck to you all in your FIRE journey! I appreciate the perspective and thought provoking topics.

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      1. Yes, oil is a short-term, “speculative commodity market”, but it is also very heavily influenced by politicians. My concern is that their involvement isn’t short-term, it is a long-term effort that seeks to remake more than just the energy markets. I worry that their Green New Deal is a leverage point for a different economy altogether. Yes, glad that oil prices are now falling. I’m not sure how strong the economy is, but I guess we’ll see over the next 6-12-18 months. If it’s a blessing to “live in interesting times”, we sure have that, don’t we?!

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    2. You can’t do much better than a Prius for miles per gallon, that’s for sure. My ‘hobby’, unfortunately right now is that I’m a ‘car guy’. For that, a Prius won’t work. I guess the era of cheap gas is over, so I’ll just have to live with the higher cost of my fun!

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