Gas Prices: How Much Do They Matter?


  • Gas Prices

    Gas Prices

    I hate $3-a-gallon gas! I curse the price every time I buy it…which is just as often as when it was $2 a gallon. | July 01, 2010

I have come to a controversial revelation: For most of us, gas prices really don't matter that much.

Now that I've got your attention, let me explain.

First, even at $3 a gallon, gas still doesn't cost any more than it did in 1981, when you adjust for inflation. So these aren't really "record highs" no matter how much the media likes the term.

Second, even at $3 a gallon, trucks are still outselling cars. Yes, the race has tightened up somewhat, with trucks making up only a slight, versus clear, majority in total U.S. sales. But they're still the majority. Remember a few years ago when the analysts were freaking out? "It looks like truck sales might actually surpass car sales in the coming years!" Well, they surpassed them and kept right on going, so much so nobody even blinks at the "trucks are outselling cars" fact anymore. And, even with the recent spike in fuel prices, trucks continue to outsell cars.

What happened to the old "Sure, trucks are hot now — but just wait until the next fuel crisis rears its ugly head" condemnations by various analysts? Hey guys, the head has officially been reared, it's pretty ugly (at least if you believe media reports), and the truck-a-thon continues in showrooms across the land.

Finally, let's just take a cold, hard look at the numbers. I'm going to throw out some very basic mileage and fuel price figures — mostly because those are the only types I can deal with — to prove my point. If you drive 10,000 miles a year, and your vehicle gets 20 miles to the gallon, then you use 500 gallons of gas a year. If gas has gone from $2 a gallon to $3 a gallon in the last year, then you are spending an extra $500 a year on gas. See, I told you I'd be keeping it basic.

Now I'm not arguing that people are happy to spend $500 more a year on fuel. Nobody is happy about that (except a few CEOs and board members at a few key companies in a certain industry…). But at $500 a year that's an extra $41.60 a month you're spending. Most people could save that much by downgrading their cable or satellite packages. I'm not even suggesting giving up cable or satellite TV completely, just going from "package 2" to basic would do it. Same goes for a broadband Internet connection. Again, I'm not suggesting you cut yourself off completely from the Web (for some reason I don't like that idea at all…). But how many of us really need a broadband connection versus a pathetically slow, but fully functional dial-up arrangement?

Just to be clear, my point isn't that Americans are a bunch of wasteful, materialistic and snot-nosed whiners who want all their luxuries and limited resources at a ridiculously cheap price. Wait…I kind of like that. Maybe that is…No! No, that's not my point. My point is that, for most of us, life in a $3-a-gallon world isn't that different from life in a $2-a-gallon world. Maybe we all go out for dinner one less time a month. Maybe we raise the deductible on our automobile insurance and hope we don't have to file a claim. Maybe we don't do anything different and our notoriously horrid rate of including a line for "savings" in our monthly budget just gets a little more horrid.

Regardless of how you're dealing with these "record high" gas prices (oops, now I'm doing it), I stand by my original claim that, for most of us, gas prices really don't matter that much.

Of course I could be wrong, but before you pen an irate e-mail just take a moment and ask yourself: How much has my life really changed due to the increased price of gas?

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