As a nation it seems we’re becoming fixated on the price of a gallon of gasoline.
To an extent, this is only natural. Can you name another product that we use every day that has spiked in price by nearly 50% during the last year or two, and that has nearly doubled from its lowest point during the last eight?
The price of crude oil topped $75 a barrel this past week, a record high, and developments in oil supply and shortages are widely reported, so it shouldn’t be a shock that people are hyper-sensitive to the topic.
Still, you have to wonder, are we overreacting?
For example, I’m not happy with the fuel economy of my smallish SUV. It has a six-cylinder engine, appears tiny next to a Navigator or Escalade, and it looks like a micro-car next to a Hummer.
With the air conditioning blasting on 100 degree days, as it has been lately, I’m getting about 11 miles to the gallon in the city.
I hate this.
Am I having an irrational reaction?
Was I promised a rose garden?
Yes and no. The EPA mileage estimate for the city was 16, which isn’t 11. But now, we know from recent disclosures that the phrase “Your mileage may vary" is really a hoot.
When the EPA does its tests, the air conditioning is off and highway speeds are no more than 55 miles per hour. I understand this will change, soon.
From an economic point of view, a $3.35 versus a $2.35 gallon of premium gas is statistically great, but financially modest, given the other fixed costs of driving.
I drive about 1000 miles per month. I’m consuming about 85 gallons, so more expensive gas is costing me $85 additional dollars per month. Given the fact that my payments for my lease, for insurance, for tires and maintenance come to about $1,000 per month, my overall added cost of driving has been a mere 8.5%.
My fixed costs are higher than many, but still, a 42.5% increase in the price of premium gas has made my overall costs only 8.5% higher.
So, what do those Escalade and Navigator and Hummer drivers, or I for that matter, have to complain about?
Even if I got 30 miles per gallon, my overall costs of driving wouldn’t drop significantly, all other things being equal.
As long as these sorts of economics inform the costs of driving, people will not have a significant incentive to economize, unless they’re concerned about global warming, geopolitics, and dependency on unstable, foreign nations.
Dr. Gary S. Goodman is the best-selling author of 12 books, over 700 articles, and the creator of numerous audio and video training programs, including “The Law of Large Numbers: How To Make Success Inevitable, " published by Nightingale-Conant-a favorite among salespeople and entrepreneurs. For information about booking Gary to speak at your next sales, customer service or management meeting, conference or convention, please address your inquiry to: firstname.lastname@example.org