Prices Soar – But Is it really that bad?

Ben Franklin said death and taxes were the only two certainties. He never owned a car. I’d propose that we amend Mr. Franklin’s list to include “complaining about gas prices.” While prices of most commodities continually grow, nothing seems to draw as much fury as prices at the pump. But how much of our grumbles have anything but the force of hot air behind them?

In a recent edition of The Chimes, a sophomore on campus was quoted as saying, “The gas prices have become so ridiculous that I don’t get a chance to go off campus as much as I would like because I can’t afford to fill up my tank every week. It’s depressing when it costs over $40 to fill up my car. Almost makes me want to buy a Prius, but that will never happen.”

I can certainly empathize with the cost of travel and its deductions from one’s pocketbook. My daily commute is in excess of 70 miles. When I accepted a position at Biola one thing I looked at was fuel costs for the lengthy commute. It figured to be almost an hour’s wages — ouch! But I accepted that burden in exchange for the benefits of working here at Biola. Also in that exercise of calculating expenses I noticed just how much gas actually costs. I’ve had my perspective altered somewhat regarding fuel prices and consequently empathize slightly less with some of the most common complaints.

Let me give you some numbers to show you what I am talking about. Government estimations project the average 2007 model car’s miles per gallon (mpg) at 26.4. That’s reasonable. My 1999 pickup averages between 23 and 25 mpg. For the following example I’ll use 25 mpg to simplify the math. Chevron gas on the corner of La Mirada Blvd. and Beach Blvd. was $3.49 this morning (let’s use $3.50). At that mpg and price, a car costs $0.14 per mile.

The Energy Information Agency puts the average yearly mileage for most cars around 12,000. Broken down, that means the average driver travels about 33 miles on the roads every day. At 14 cents that puts the daily cost at $4.62 or $32.34 per 7-day week. What if that same gas station boosts prices to $4 tomorrow? What does that move cost? For the same average driver cost per mile rises to 16 cents, or a weekly cost of $36.96. So, an increase from $3.50 to $4 in gas costs the average driver $4.62 per week extra in gas.

Think about that. One trip to a drive-thru window or Starbucks per week is equivalent to a 50-cent increase in gas! Also, note that to move a two ton chunk of metal and cargo 5,280 feet is less than half of a postage stamp. Milk, Fiji water, orange juice and Red Bull all cost at least as much if not more than gasoline, and people go through a lot more gasoline than Red Bull.

How about some of the alternatives that are often mentioned? The statement above said the speaker almost considered buying a Prius to avoid the cost of gas. How does that look on paper? Because there is no non-hybrid Prius, I will use the Honda hybrid and its gasoline equivalent for a quick overview.

The Honda hybrid starts at $22,600 with a top mpg of 45. In contrast, the non-hybrid sedan starts at $15,010 and boasts a hefty 34 top mpg. To keep the math simple I will not factor in taxes or financing costs. Imagine a 6-year loan on each car. The total price difference between the two is $7,590 or $105.42 if spread over a 6-year loan (before taxes and financing costs). At $4 per gallon the hybrid and standard can yield costs of 9 cents and 12 cents cost per mile, respectively. With our average driver scenario, this puts monthly (30 day) gas costs for the hybrid at $89.10 per month with the standard engine trailing at $118.80. For the hybrid fuel, savings amount to $29.80 per month, but still $75.62 per month over on purchase costs (before taxes and financing). A hybrid will not solve your financial problems, though I hear the Prius is a great car to own.

Gas is really not that expensive for what we get in return. Most of us could take public transportation to our destinations, but many of us choose our own vehicles for convenience; note that you’re paying, or will someday, pay taxes for that service whether you use it or not.

That comes at a premium, but the luxury is much cheaper than most of the sinks we pour our money in to. I wish I did not have to shell out a few hundred bucks per month in fuels costs, but I agreed to that when I accepted this position, and if I were willing I could always move closer. When I travel for pleasure, part of being a responsible adult is factoring in all costs, including travel. I cannot choose the luxury and then complain that it costs me.

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