Wednesday, June 18, 2008

Crunching the cost of gas

I see Jeep commercials on TV that offer, as a bonus to buying one of their vehicles, a "hold" on gas prices to $3/gallon for the next three years. That made me wonder, how much of a benefit is that? How badly am I getting gouged on gas prices?

If I ask myself off the top of my head how much I am overpaying for gas, I'd say offhand that if gas goes, to say $4.70/gallon by December, I'll be overpaying a total of $2,000 by the end of this year. I just pulled that number out of the air; it's based on nothing.

Now, let's do the math. Let's say that I consider $3/gallon a reasonable amount to pay for gas. I don't really, I think $2/gallon is reasonable, but okay, I'll go with three. My little sedan holds 15 gallons. So in theory, a $45 fill-up is my reasonable starting point.

I get an overall average of 23 mpg, and I don't drive a lot, as I have a very short commute to work, and always have had a short commute for as long as I've owned my car, the last five years. On average, I've put on about 6,000 miles a year on my car. So based on that, let's say I fill up 18 times a year, or 1 1/2 times a month. So 18 times $45/fill-up would be $810 per year that I spend on gas. I understand that this is on the low side, and that many families own SUV's with bigger tanks and/or put much more mileage on their vehicles.

Today I filled up on $4.20 gas. I'm reasonably sure that in six months, gas will be at least 50 cents more. So let's pick a guesstimated number and say I paid an average of $4.50/gallon this entire year on gas. That's $1.50 more than what I consider reasonable ($3/gallon) or a full 50% more. So I'd be paying, in theory, $405 more a year or a total of $1215 a year on gas.

Actually, that's not so bad for me personally in terms of actual dollars. Right now, $405 is less than a day's work for me, so I need to put it in perspective. It's the 50% that really bothers me. And the fact that if I increase my usage for whatever reason, that number could easily reach the point of not being affordable. I know there are people who fill up every week. On a 15 gallon tank, that's an extra $22.50/week or an extra $1,170 per year. That's obscene.

No comments: