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More on the Price of Gas

By JLP | May 21, 2007

Here’s an interesting comment from last week’s post How Much Does it Cost to Drive ONE Mile?

Kevin says:

The emotion of Gas pricing is funny. Lets compare it to other liquids.

$1.50 plus deposit for one liter of soda. Or a $1.25 for 16oz. of you buy out of a vending machine. Thats roughly half the price of gallon of gas for sugar water. Where’s the outrage?

A gallon of water at the grocery store. I’ve never paid for it but I would guess at least $2.

Don’t even get me started on alcohol prices in a metropolitan bar.

All these products don’t have to be shipped across oceans, refined, distributed. Now I am not saying that the pricing of gas isn’t going a little crazy based on oil companies profits. I am just saying its interesting to think about what people will get outraged about.

My Response

Kevin,

Although what you say is true, you’re missing one important point:

NONE of the things you mentioned are necessities. Gas, on the other hand, is. There’s a big difference. If I don’t want to pay $4.00 for a cup of Starbucks, then I don’t pay it. I can buy cheaper coffee beans at the grocery store and make my own coffee for 1/4 the price (or less) of a cup of Starbucks.

For the most part, I don’t have that option with gas. Sure, I could drive less or buy a more fuel-efficient car. But what if I’m already driving as little as possible? What if I already have a fuel-efficient car? As of right now, there’s not a lot we can do until the following happens:

1. We find alternative fuels to help lower the demand for gasoline.

2. Build more refineries to alleviate supply issues.

3. Build better fuel-efficient cars.

The bottom line is that we should all expect for fuel to take a much larger percentage of our budgets than it has in the past. I don’t like it, but what can we do about it?

Topics: Budgeting, Cars | 21 Comments »


21 Responses to “More on the Price of Gas”

  1. samerwriter Says:
    May 21st, 2007 at 11:19 am

    Gas may or may not be a necessity.

    Gas in the quantities that Americans consume it, is *not* a necessity. It is a luxury. Just as one can buy coffee at the store instead of Starbucks, he can ride a bike to work instead of buying gas.

    I agree with a couple of the items you mentioned:

    1. We find alternative fuels to help lower the demand for gasoline

    The single best way to find alternative fuels is to raise the price of gas. Until the price of gas increases, there is no market incentive to develop alternatives. And without a market incentive, we get lame attempts by marketing departments to appeal to our inner hippies, like the Toyota Prius.

    3. Build better fuel-efficient cars.

    There are fine fuel efficient cars out there, but people don’t buy them. Why? Because gas is too cheap.

    The bottom line is that Americans waste fuel. We waste it because it is cheap. There is no incentive to waste less. The best way to encourage people to waste less fuel is to charge more money for it. I’m not entirely pleased to see all that money flow to the oil companies bottom line — the true cost of fuel to society should reflect the externalities: pollution, dangerous streets, foreign wars. That should be reflected in the price with higher gas taxes.

  2. Brad Says:
    May 21st, 2007 at 11:54 am

    samerwriter–

    I could not agree with you less. :-) So I won’t really bother arguing. But the point remains, people will slow consumption when it hurts them enough to justify a change. I am not pulling for this, but it may eventually happen. For most Amercians a change in driving habits is not much of an option. A change in vehicles is, and I plan to make such a change soon.

  3. JLP Says:
    May 21st, 2007 at 12:01 pm

    Samerwriter,

    Normally I agree with you. However, on this one I have to disagree. Sure, if you live in the city or are relatively close to where you work, riding a bicycle could be an alternative. This is not the case for most people. Yes, they could move closer to work but I have a feeling that higher housing costs would negate the money saved by using less fuel.

    Having cheap fuel over the years is what has allowed our country to prosper.

  4. RGS Says:
    May 21st, 2007 at 12:43 pm

    Petroleum is not a luxury in any sense; it is a key component of our national infrastructure. No matter how you try to live, the rising cost of oil is going to impact you – well, unless you live a subsistence existence in a cabin somewhere. This is not an economic issue; it is a national strategic issue. Our leaders let us down when they ignore the long term strategic impact of oil ‘scarcity’ on the health of our nation. There should have been a national effort 30 years ago to greatly diminish our dependence on oil. If aggressive action had been taken, we’d be in the best position in the world to weather this storm and we’d also not be spending so much of our national capital waging war in the Middle East.

  5. plonkee Says:
    May 21st, 2007 at 1:08 pm

    I agree with samerwriter that petrol in the quantities that Americans consume is a luxury. (I also agree with RGS that petroleum is not a luxury at the moment). If you lived over here where petrol is over 90p a litre (approx $7 a gallon) you’d use less – we do.

    As you stated you can drive less and/or buy more efficient cars. You have a problem there, in that as far as I’m aware the US market hasn’t had the need for efficient cars until now. So I guess you’re stuck with driving less. Which can be done, if you really want to. Perhaps more people should consider becoming one car households – that could force the issue.

  6. Kevin Says:
    May 21st, 2007 at 1:25 pm

    JLP thanks for reading my comment on your previous post.

    My intention wasn’t to diminish the problem but to emphasis how it stands out from other consumables that people use daily. And how people react EMOTIONALLY to the price.

    Oil penetrates so many markets and experts can list the products, such as plastics, that oil goes into. But the majority of the public reacts to the the big numbers on the signs at the gas station, not the other market implications. There is an emotional response when you see the the price jump ten cents.

    Corn is going to go up in coming years if ethanol truly catches on. Will the public have an outcry when that happens? Corn prices aren’t printed in large numbers on the corner of intersections. Corn isn’t essential to peoples lifestyles. It will be interesting to see.

  7. cami Says:
    May 21st, 2007 at 2:10 pm

    JLP, what about 4. Build infrastructure to support alternative forms of transportation: bikes, light rails.

    While higher housing costs closer to city center, might negate the current monetary savings of gas prices, what about all of the other non-monetary benefits like having more time to spend with our family, less environmental pollution, etc.

    Kevin, I think that corn is way more integrated into our lives than people think (just think of every food product that contains high fructose CORN syrup).

  8. Brad Says:
    May 21st, 2007 at 2:31 pm

    plonkee,

    Some people certainly drive more than they have to. But fuel consumption can never, ever be reduced in the US to levels comparable to the UK. Everything here is very spread-out. My home is not within a reasonable walking distance from any place to buy groceries, and it’s not even within biking distance from where I work. Most people in the US have to drive (to commute and shop) whether they like it or not.

    With that said, some people certainly burn fuel because they can, not because they must. Eliminating that usage may help but it’s not going to make much of a dent on the US fuel consumption.

  9. Justin Says:
    May 21st, 2007 at 2:33 pm

    I live in a city where ethanol prices are posted at gas stations. They appear to be about $0.80 lower, currently. However, this does not take into account their 20% lower efficiency of gasoline and $0.50 government subsidy.

    A few of the uses of corn (i.e. why enthanol is not a viable renewable energy source):
    Adhesives, Cardboard, Construction Materials, Detergents, Paper, Textiles, Plasterboard Adhesives, Animal Feed, Bookbinding, Laminated Building Products, Enzymes, Leather Tanning, Lubricating Agents, Metal Plating Antibiotics, Enzymes, Coatings, Insecticides, Organic Solvents, Plasticizers, Shampoo, Antibiotics, Aspirin, Baked Goods, Candies, Condiments, Mixes & Instant Preparations, Processed Meats, Puddings, Baby Food, Bologna and Hot Dogs, Chewing Gum, Cookies & Crackers, Dessert Mixes, Fruit Drinks, Canned Foods, Cereals, Medicinal Syrups, Pickles, Salad Dressings, Seasoning Mixes, Brownies & Baked Goods, Canned Fruits, Cheese Spreads, Cured Meats (such as bacon), Dessert Mixes, Intravenous Solutions, Jams & Jellies, Soda Fountain Preparations, Marshmallows, Soups, Carbonated Beverages, Fruit Fillings, Cereals, Frostings, Ice Cream & Frozen Desserts, Pancakes, Pastries, Relishes & Sauces, Syrups & Dessert Toppings, Ethanol, Citric Acid, Lactic Acid, Essential Amino Acids, Sugar Alcohols

    I think someone needs to examine corns influence on inflation problems.

    The fuel answer is in hydrogen and fuel cells, at least when the technology catches up.

  10. Rob Says:
    May 21st, 2007 at 2:54 pm

    Brad – You don’t have to live somewhere where it is a long drive to buy groceries or get to work. That in itself is a luxury. A lot of our newer (1950′s on) development was structured around the car and cheap gas prices. If gas actually gets expensive, I foresee that we will start moving closer together again. But I think samewriter is absolutely right. Gas is cheap and we burn through it without a care. There are more SUVs and trucks sold in America than cars. Most of these are just for style/preference. And try driving somewhere over Memorial Day weekend and tell me that we aren’t driving too much. A vast majority of the traffic you will see is people headed off to barbecues or to visit relatives. As nice as this is, it is all luxury driving, not necessity.

    If on the other hand, we do want to make gas even cheaper, one place to start would be by reducing or eliminating the huge government taxes that are added onto every gallon we buy.

  11. Rob Says:
    May 21st, 2007 at 2:59 pm

    Oh, I forgot to mention that my neighbor just tore down his garage and put in a new THREE CAR garage because he has a car, his wife has a car, and now their oldest child is reaching driving age and gets her own car. And we live in a big city with tons of public transportation.

    As for hydrogen fuel cels, the problem as I see it is that it takes energy to produce the hydrogen, which has to come from somewhere. I think the best solution is to invest more in nuclear energy, which can be used to produce hydrogen and at least the environment will benefit.

  12. Brad Says:
    May 21st, 2007 at 3:19 pm

    Rob,

    In many ways it is a financial decision– not a decision of luxury. In order to justify the cost of living in a city where public transportation is an option, gas would probably have to jump significantly. $10? $12? My mortgage payment wouldn’t cover half the rent of city living in many places. The city I live in (near) has no area where walking to everything is an option. Even downtown is not an option, as you have to travel 5 miles to get to a grocery store in the suburbs.

    Squeezing 300 million people into large cities doesn’t seem like a very good option to me either. That has its own problems.

    I do agree with you on nuclear power. It’s much cleaner than most other sources. But it will never happen here. The same people that want us to reduce emissions are often the ones that would refuse to build new nuke plants because of the nuclear waste and tiny chance of criticality. There is also the NIMBY (Not In My Back Yard) problem of building new plants. It would drive property values down, so nobody within miles of a new plant is going to be pleased. If constituents don’t want it, politicians will block it. Anything to keep office.

  13. Foobarista Says:
    May 21st, 2007 at 10:43 pm

    The big changes in US gas use won’t come until a generation has passed: we need things like zoning law changes to allow mixed-use high-rises like they have in Asia. Riding your bike to the post office may make you feel ecologically correct, but it won’t do much in the overall scheme of things.

    You can have a relatively low cost for transportation, but to get there, you better like living next to your neighbors, since you’ll have lots of them. Three car garages, 3000 square foot houses, and house plots measured in fractions of an acre, much less acres, will be a thing of the past: say hello to condo towers with first-floor malls and subway stations in the basement. These are actually quite comfortable once you get used to them, but Americans who think that cities like Houston or LA are “too crowded” may have a hard time adjusting.

    PS: I lived a year in Beijing and several months in Shanghai. You don’t know “crowded” until you’ve been in a Shanghai subway station at rush-hour…

  14. Jimmy Says:
    May 22nd, 2007 at 8:25 am

    I completely disagree!!!! GAS is NOT a necessity!! I ride my bike to work! Over 50% of car trips are for less than 5 miles!

  15. BD Says:
    May 22nd, 2007 at 8:46 am

    I know several people who bike more than an hour to work on a regular basis. You just have to be committed.

    I have two offices, and I split my time between them. I work from home one day a week, walk to one office 3 days a week and drive the other day. Really, it is possible to find alternatives – you just have to be flexible and willing to get a little uncomfortable for the sake of exercise, your wallet, or the planet (pick your favorite).

  16. S Says:
    May 22nd, 2007 at 9:11 am

    I am sorry Jimmy you are wrong. How do you think medicine, food and other required things are sent to you. Thats right, gas. A diabetic needs insulin or else they could die. That gets shipped to the hospital by a vehicle that uses gas. If they can’t get their insulin they will DIE! How is that now a necissity? Right now gas is a necessity. In the future we will use some other fuel to get around, but right now we have to make due with what we have.

  17. Jeremy Says:
    May 22nd, 2007 at 11:47 am

    I saw a funny bumper sticker on my way home from work the other day. On the back of a Hummer H2 they had a bumper sticker that said “gas prices stink”.

    I don’t care for high gas prices since I do quite a bit of driving but until the gluttony for status symbol vehicles is eliminated we will never see much of an improvement. People would rather bitch about the problem while not making any changes themselves.

  18. terrence Says:
    May 22nd, 2007 at 11:09 pm

    Have a look at this article from a year ago. They look at the price of gas adjusted of CPI and increased disposable wage increases. You also have to take into account the greatly improved gas mileage cars now get.

    “In truth, gasoline prices today are taking less of a bite from our pocketbooks than has been the norm since World War II.”
    http://www.cato.org/pub_display.php?pub_id=6440

  19. Dan Says:
    September 12th, 2007 at 8:47 am

    Having insurance to cap the amount you pay on your gas would be great I think. What does anyone else here think ? Would this be a good idea or a bad one ?

  20. Jimmy Says:
    March 15th, 2008 at 11:28 am

    We ride 2 Dahon Fouldup Boardwalk 7 speed Bicycles We are in are 60s, We ride around 3 times a week 4 miles oneway to town to Wal-Mart To Post office Grocegies store,We have fouldup Baskets on the back, We love are Dahon Bicycles The Dahon Bicycles was well worth the money You can put it on the Bus Are a Train, NO OIL NO GAS Why do you need a Car A Bicycles is a car Be Nice More Citys put in Bicycles Lanes Have Fun Riding

  21. Sydney Collins Says:
    May 19th, 2010 at 7:30 pm

    Hydrogen Fuel is very promising, i only hope that we can mass produce soon enough.*-;

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