fuel costs http://www.wisebread.com/taxonomy/term/4595/all en-US How Long Does It Take to Break Even With an Electric Car http://www.wisebread.com/how-long-does-it-take-break-even-with-an-electric-car <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-long-does-it-take-break-even-with-an-electric-car" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-508101460.jpg" alt="Learning how long it takes to break even with an electric car" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Electric cars come at a premium. You can still get a hefty tax rebate for buying an all-electric or plug-in hybrid vehicle, but even after deducting that $3,700 &mdash;$7,500 rebate from the price, you're still going to pay more up front for electric than a gas-powered engine.</p> <p>You'll make up for it in gas savings, right? Maybe &mdash; but with low gas prices persisting, the payback may take a long time. Here's a look at the math behind the theory that an electric car will pay for itself.</p> <h2>Upfront cost</h2> <p>My husband and I recently test drove a Kia Soul EV. It was peppy and felt surprisingly roomy for a small car. It costs about $34,000, while the Soul without an electric motor costs only $20,000. So even after deducting the $7,500 tax credit, you'd still be paying $6,500 more to go electric. (Your state might offer additional credit, but I'll leave that out of this calculation.)</p> <p>Another upfront expense, which I didn't think about until I looked at EVs, is the cost of buying a home charging station and having it installed in the garage. That would be about $1,200. However, you might be able to apply for a local rebate or credit to defray that cost as well.</p> <p><strong>The difference in upfront cost</strong>: Buying and getting set up with the Kia Soul EV costs about $7,700 more than the nonelectric.</p> <h2>Fuel costs</h2> <p>Nationwide, at the time of writing, the average gallon of gasoline costs $2.41. If you live in California or in a big city like I do, you may be paying closer to $3. If I bought a traditional Kia Soul, I'd get about 28 miles per gallon &mdash; so driving a typical 15,000 miles a year, I'd be buying about 535 gallons of gas. In most parts of America, that would run about $1,300 for a year's worth of fuel.</p> <p>With the electric car, I could drive about <a href="https://www.fueleconomy.gov/feg/Find.do?action=sbs&amp;id=35601" target="_blank">105 miles on 33.7 kilowatt-hours</a>, which at a cost of 12 cents per kWh, means I could drive 15,000 miles a year for $578 in electricity. You can save even more on charging if you work somewhere with a free charging station, or if you have access to free public chargers.</p> <p><strong>The difference in fuel costs</strong>: Electric costs $722 less per year at current gas prices.</p> <h2>Maintenance</h2> <p>Because they don't require oil changes, all-electric vehicles cost less than regular cars to maintain &mdash; about 35 percent less, according to one estimate I found. According to Repair Pal, the average cost to maintain and repair a regular Kia Soul is $446 a year, while the EV is $267.</p> <p><strong>The difference in maintenance cost</strong>: Electric costs $179 less per year.</p> <h2>Other expenses</h2> <p>You might wring a few more dollars out of your EV from insurance company discounts and free public parking. You may also save on tolls if your area allows you to drive your EV in the carpool lane.</p> <h2>Breaking even</h2> <p>So, you started out life with your new EV $7,700 in the hole after buying the car, installing a charging station, and pocketing the federal tax credit. You will save about $900 a year in fuel and maintenance costs. At this rate, it will take you eight to nine years to break even. That's a pretty long time to recoup an investment.</p> <h2>Other benefits of going electric</h2> <p>However, there are non-monetary benefits to owning an electric vehicle that make the purchase worthwhile for many people.</p> <p>First, there is the knowledge that you're contributing less to climate change and air pollution by using electricity instead of gasoline. While EVs produce no tailpipe emissions, the power plants that fuel them do produce emissions. Still, the Department of Energy estimates that EVs are responsible for less than half the emissions of gas vehicles. That's big.</p> <p>Second, your EV may entitle you to privileges such as driving in the carpool lane. In the high traffic Bay Area where I live, many EV owners made their purchase decision based on carpool lane access alone, because it can make the difference between a two-hour commute and a one-hour commute into Silicon Valley.</p> <p>If you're buying an EV for the perks, check all the details before you sign the contract to make sure you're really getting everything you want. Sometimes states have restrictions, such as quotas for carpool lane stickers and income caps for tax rebates.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/carrie-kirby">Carrie Kirby</a> of <a href="http://www.wisebread.com/how-long-does-it-take-break-even-with-an-electric-car">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-8"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-ways-to-drive-a-hybrid-or-electric-car-on-the-cheap">6 Ways to Drive a Hybrid or Electric Car on the Cheap</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-still-smart-to-buy-an-electric-car-while-gas-prices-are-low">Is It Still Smart to Buy an Electric Car While Gas Prices Are Low?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-easy-diy-car-repairs-to-save-big">8 Easy DIY Car Repairs to Save Big</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/to-change-the-bulb-just-remove-the-bumper-wait-what">To change the bulb, just remove the bumper. Wait, what? - UPDATED.</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-money-mistakes-everyone-makes-when-buying-their-first-car">7 Money Mistakes Everyone Makes When Buying Their First Car</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Cars and Transportation break-even carpool comparisons electric cars fuel costs gas prices hybrids maintenance rebates repairs Mon, 22 May 2017 08:30:16 +0000 Carrie Kirby 1947501 at http://www.wisebread.com Living Cheaply for the Long Term http://www.wisebread.com/living-cheaply-for-the-long-term <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/living-cheaply-for-the-long-term" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/stone-wall_0.jpg" alt="Stone wall" title="Stone Wall" class="imagecache imagecache-250w" width="250" height="182" /></a> </div> </div> </div> <p>Frugality sites are full of advice for cutting your expenses right away. Everybody's got a list of unnecessary expenses, an exhortation not to buy stuff you don't need, and some ideas for how you can get the things you do need more cheaply. Living cheaply for the long term is different. Call it &quot;strategic frugality.&quot;</p> <p>Most people don't really have a goal to live cheaply. Rather, within the constraints of their income and their important long-term goals (like college for the kids and retirement), they want to live as well as they can. The problem is, boosting your living standard at each opportunity makes it impossible to take the strategic actions that let you live better for less. (And once you've got <strong>that</strong> down, funding your long-term goals gets a lot easier.)</p> <p>Many of these strategies cost money, which means that they're not an option for someone who's in the midst of a financial emergency like a loss of income or a major unexpected expense. For that, see my <a href="http://www.wisebread.com/emergency-belt-tightening">emergency belt-tightening</a> post with a bunch of ideas on how you can cut your expenses <strong>right now</strong>. Living cheaply on a non-emergency basis is different. Living cheaply for the long term sometimes involves spending more money now with an eye toward long-term savings. Many of the basic ideas are pretty obvious, but it's worth putting them all together and looking at the pattern they form.</p> <h2>Strategies</h2> <p><strong>Buy stuff that lasts</strong>. This saves money, because you don't need to replace the item as often. It also raises your standard of living, because stuff that lasts is often higher quality.</p> <p><strong>Buy stuff that reduces future expenses</strong>. Things like weatherstripping, insulation, energy-star appliances, a fuel-efficient car, a small motorcycle, or a bicycle can all save on <a href="http://www.wisebread.com/fix-energy-in-tangible-form">future fuel costs</a>. Doing proper maintenance can save on future repair costs, and proper preventative care can save on future health costs. Tools, books, and classes that enable you to <a href="http://www.wisebread.com/make-your-hobby-pay-its-way">make (or repair) your own stuff</a> can save on future expenses.</p> <p><strong>Stock up when things are cheap</strong>. This saves money, because you're getting the stuff at a better price. It also raises your standard of living, because you don't have to rush off to the store to get something (or else decide to make do without it). As a bonus, it produces <a href="http://www.wisebread.com/huge-tax-free-investment-returns">huge tax-free investment returns</a>.</p> <p><strong>Buy things that earn money</strong>. That is, invest in things like bonds and dividend-paying stocks. If you can handle the extra work of being a landlord, you can also invest in rental property.</p> <p><strong>Take care of your stuff</strong>. This goes along with buying things that last, but it's a concept that isn't well supported by society these days. It's tough to get things that are made to last &mdash; most <a href="http://www.wisebread.com/things-wear-out">things are made to break</a>. Still, despite planned obsolescence, most things will last longer with gentle use and many things can be repaired (or kept in service, at least temporarily, despite not working as well as they did when new).</p> <h2>Best practices</h2> <p>When you want something, it's easy to fool yourself into imagining that whatever it is will somehow save money in the long run. (Such as thinking that a home theater will pay for itself in fewer movie tickets or that a fitness center membership will pay for itself in fewer heart bypass operations.) Avoiding that pitfall simply requires being honest with yourself. To that end, here are a few best practices.</p> <p><strong>Evaluate your budget against your needs</strong>. Even among people who have a budget, most simply assume that last year's spending is the benchmark against which they need to compare. Instead, <a href="http://www.wisebread.com/a-better-way-to-create-a-budget">start each budget category at zero</a>. Then, evaluate what you actually need and investigate the cheapest way to fill that need.</p> <p><strong>Analyze fixed costs</strong>. The average household has a bunch of <a href="http://www.wisebread.com/manage-your-fixed-expenses">costs that are fixed</a> for the medium term &mdash; a lease that runs for a year, a cell-phone contract that runs for two, a car loan that runs for several years, a mortgage that runs for a decade or three. You can often get a better deal if you commit to an expense for a longer term, and a collection of such deals is what adds up to living cheaply. Still, always think twice before buying things that come with monthly fees or that need to be insured, fed, or maintained (unless you can maintain them yourself). The more fixed costs you have, the less flexible your household cost structure becomes &mdash; and an inflexible cost structure makes it tough to handle a financial emergency.</p> <p><strong>Learn how to do things yourself</strong>. If your goal is the highest possible standard of living, you probably come out ahead by putting all your time into whatever is your main way to earn money. In the time it would take to change your oil you can earn more than enough to pay someone to change it for you. In the time it would take just to plant a garden you can earn enough to buy a whole summer's worth of vegetables. But if your goal is to live cheaply for the long term, learning how to do things yourself adds a whole category of cost saving options, while at the same time recovering some of the flexibility you'd otherwise lose to fixed costs.</p> <p>Having said all that, a lot of keeping costs down is just spending less. If you don't do that, none of this other stuff is going to add up to much. Still, there are certain opportunities where spending a little more up-front, or committing to spending for a little longer, can save money. The key to living cheaply for the long term is cranking the numbers to figure out which option is cheapest &mdash; and then, of course, taking action in accordance with what you figure out.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> of <a href="http://www.wisebread.com/living-cheaply-for-the-long-term">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-you-need-to-make-financial-habits-not-goals">Why You Need to Make Financial Habits, Not Goals</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/eight-natural-ways-to-make-water-more-flavorful">Eight Natural Ways to Make Water More Flavorful</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-ways-to-tidy-up-your-finances-before-the-holidays">10 Ways to Tidy Up Your Finances Before the Holidays</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/chinese-money-habits-how-my-culture-influences-my-attitudes-toward-money">Chinese Money Habits - How My Culture Influences My Attitudes Toward Money</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-personal-finance-skills-everyone-should-master">12 Personal Finance Skills Everyone Should Master</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Frugal Living cost-saving fuel costs living simply long-term Wed, 09 Dec 2009 14:00:07 +0000 Philip Brewer 3938 at http://www.wisebread.com Rural living in a world with expensive fuel http://www.wisebread.com/rural-living-in-a-world-with-expensive-fuel <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/rural-living-in-a-world-with-expensive-fuel" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/farm-near-gettysburg.jpg" alt="Rural living" title="Rural living" class="imagecache imagecache-250w" width="250" height="145" /></a> </div> </div> </div> <p>Rising fuel costs are hard on everybody, but one group gets hit especially hard:&nbsp; Rural folks--especially rural folks who work in town.&nbsp; On my previous posts on expensive fuel, commenters have said that, even after doing all the stuff I talked about, they still can't make ends meet.&nbsp; They've got a point.</p> <p>There are actually two groups who complain that my &quot;expensive fuel&quot; posts don't help.&nbsp; This post isn't for the ones who find the idea of driving less to be inconceivable.&nbsp; This post is for the people who have already eliminated unnecessary trips and combined the rest as best they can, already started running any errands they can on bicycle or by foot, already insulated their house.&nbsp; But when they plug higher fuel costs into their budget, their income just doesn't cover it--because every little errand is a long drive to town, and some of those errands have to be done promptly.</p> <p>If you live in the country, but you work in town, you're stuck driving the round trip every work day.&nbsp; You can fiddle around the edges--maybe arrange to work 10-hour days and only go in 4 days a week, maybe telecommute one or two days a week, maybe buy a very fuel-efficient car--but the basic calculation doesn't change.</p> <h2>Looking back</h2> <p>The arrangement of living in the country but working in the city has been working great, up to now, only because fuel was cheap, but it's worth observing that this isn't a new problem.&nbsp; It is, rather, a very old problem. &nbsp;</p> <p>Until the invention of the railroad, rural living meant self-sufficient living--if you couldn't make it yourself, you'd better have brought it with you.&nbsp; Depending on just how rural you were, trips to town might be monthly, or they might be something that you did just one or two times a year. &nbsp;</p> <p>Even the railroad didn't mean that everyone could pop out to the store anytime they wanted, but it was a big change.&nbsp; It meant that even in a small town, you could (eventually) get pretty much any manufactured item.&nbsp; For rural folks who only went into town monthly or semi-annually, that was good enough.&nbsp; You went to town, you ordered the stuff you needed at the store, and they had it waiting for you on your next visit.</p> <p>The car, of course, worked an even more drastic change on the landscape.&nbsp; For a brief period--less than 100 years--it's been possible to have the advantages of rural living without giving up the advantages of living in town.&nbsp; Because it's been this way for as long as most people have been alive, it's easy to forget just how different it is from the way people had always lived before.</p> <h2>Looking ahead</h2> <p>Maybe energy prices will stabilize, or even fall from current levels.&nbsp; In fact, markets being what they are, I can virtually guarantee that oil will, at some point, be cheaper than it is right now--maybe a lot cheaper.&nbsp; I think, though, that the long-term trend is up.</p> <p>If I'm right, anyone who lives out in the country needs to do some serious thinking. &nbsp;</p> <p>One option is to continue with ordinary efforts at saving fuel.&nbsp; This is a nice incremental strategy that actually scales well.&nbsp; Wise Bread has already had some stories on how to increase the fuel efficiency of your driving--slow down, keep your tires inflated, etc.&nbsp; (See <a href="/gas-efficient-driving">Gas Efficient Driving</a> and <a href="/maximize-your-cars-efficiency-with-hypermiling">Hypermiling</a>, for example.)&nbsp; Beyond that, you can get a very fuel-efficient car, switch to a small motorcycle or a scooter, aggressively combine trips and reduce trips, make some trips by bicycle or on foot, etc. &nbsp;</p> <p>These are the same ideas I've mentioned before, that simply don't do the trick for some rural folks, especially those who are trying to get by on low incomes. &nbsp;</p> <p>It's possible to turn the fuel-saving efforts up a notch.&nbsp; In fact, it's something that <strong>everyone</strong> will be doing pretty soon--as higher and higher prices require it of more and more people.&nbsp; But to people who are used to fuel being cheap, it's going to seem extreme.&nbsp; Here are some examples:</p> <ul> <li>If you work in town, crash on a friend's couch four nights a week.&nbsp; You only have to make one round trip to town.</li> <li>Carpool even if you don't work together.&nbsp; Drive as far as the last bus stop at the edge of town.&nbsp; From there, you all take buses to get to where you need to go.</li> <li>Coordinate with your neighbors to make every trip in the most appropriate vehicle:&nbsp; The guy with the hybrid drives when several people need to get to town; the guy with the pickup drives when something needs to get hauled; the guy with the motorcycle drives when someone urgently needs a prescription picked up at the pharmacy. &nbsp;</li> <li>If you or one of your neighbors has a big enough house, close up one house and have both families live in the other.&nbsp; You can drastically reduce heating and electricity costs.</li> </ul> <p>As you see, a lot of these strategies depend on friends and neighbors helping one another out.&nbsp; That used to be ordinary neighborly behavior, but the past couple of generations, we've been so rich that it wasn't necessary to rely on your neighbors:&nbsp; Ordinary folks could have both a car and a pickup (and could drive the car even for trips that could be handled on a motorcycle, bicycle, or even on foot).</p> <p>You don't have to do any of those things, if you're rich enough to buy all the fuel you need.&nbsp; But, as fuel gets more expensive, anyone who wants to live in the country will have to adjust.&nbsp; They can continue to live much as they've been living, gradually making more and more drastic efforts to use less fuel.&nbsp; Or they can change their lifestyle completely.&nbsp; Their other choices are:</p> <ol> <li><strong>Become more self-sufficient</strong>.&nbsp; If you can produce most of what you need at home, you can reduce the number of trips you make to the city from the current 5 a week, potentially to zero.&nbsp; There's a sliding scale here--even the pioneers weren't totally self-sufficient--but the key step is finding a way to make ends meet without having a job in the city.</li> <li><strong>Move to the city</strong>.&nbsp; That drastically cuts your need for fuel for going to work, running ordinary errands, and so on.&nbsp; It also (depending on what city you pick and exactly where you work and live) puts you within reach of mass transit, makes walking and bicycling more practical, increases your opportunities for car pooling, and so on.</li> </ol> <p>It's possible that we'll be saved from this fate by either cheaper fuel or vastly more efficient cars, but I don't think so.&nbsp; I do expect that we'll see lots of fuel--it'll just be expensive.&nbsp; We'll also see much more efficient cars--they just won't be efficient enough (or cheap enough) to pick up the slack.</p> <p>Aggressive fuel efficiency will do the trick for a while.&nbsp; Eventually, though, even a maximum amount of scrimping, saving, and sharing will fall short.&nbsp; When that happens, people will be left with the same two options that people have had since the first city was built:&nbsp; Be self-sufficient in the country, or move to town.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> of <a href="http://www.wisebread.com/rural-living-in-a-world-with-expensive-fuel">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/plan-for-expensive-fuel">Plan for expensive fuel</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-if-energy-costs-keep-rising">What if energy costs keep rising?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/alternatives-to-drunk-driving">Alternatives to drunk driving</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/hostels-vs-hotels-choosing-the-perfect-place-to-stay-within-your-budget">Hostels vs Hotels: Choosing the Perfect Place to Stay Within your Budget</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-long-does-it-take-break-even-with-an-electric-car">How Long Does It Take to Break Even With an Electric Car</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Cars and Transportation Lifestyle fuel fuel costs rural living Sun, 01 Jun 2008 10:59:48 +0000 Philip Brewer 2138 at http://www.wisebread.com What if energy costs keep rising? http://www.wisebread.com/what-if-energy-costs-keep-rising <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-if-energy-costs-keep-rising" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/fuel-prices-1.jpg" alt="Last year&#039;s gas prices" title="Last Year&#039;s Gas Prices" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>I don't know if energy costs will keep rising.&nbsp; Nobody does.&nbsp; Even with recent growth in China, India, and elsewhere, the US still consumes 25% of the oil produced world-wide, so a severe recession in the US could easily cut total demand enough to bring the price down.&nbsp; Recession or not, I think the medium-term trend in energy costs is up.&nbsp; Just in case I'm right, you ought to have plan for that.</p> <p>I've written before about <a href="/plan-for-expensive-fuel">planning for expensive fuel</a>.&nbsp; I emphasized that you should have a contingency plan either to take money from other budget categories to pay for expensive fuel, or else to reduce your fuel use significantly.&nbsp; That was short-term planning, though.&nbsp; This time I want to talk about longer-term planning.</p> <p>Some people still think that the recent surge in oil prices is a temporary aberration, and that oil prices will return to &quot;normal&quot; (whatever that is).&nbsp; Plenty of people think that recent prices reflect genuine underlying trends--supply restrictions from many sources together with persistently rising demand from all over the world--but that prices will reach a new equilibrium and stabilize.&nbsp; Some people, though, think that those underlying trends are likely to keep pushing prices up</p> <p>What's your plan, if that third view is correct?</p> <p>It's hard to plan in a vacuum, so let's put down some numbers.&nbsp; The <a href="http://www.eia.doe.gov/emeu/aer/txt/ptb0524.html">average price of gasoline</a> (unleaded regular) was $2.59 in 2006.&nbsp; The price yesterday at my local gas station was $3.799.&nbsp; If prices continue to rise at that rate, we'll see $10 gasoline within 5 years.</p> <p>I'm not saying that's the most likely scenario--everybody knows the dangers of assuming that recent trends will continue in a straight line--but it seems to me like a perfectly possible scenario.</p> <p>Most reporting on possible price trends in gasoline has recently accepted the notion that $4 gasoline is a foregone conclusion and is starting to talk about $5 gasoline as a scary boogyman.&nbsp; I'm urging you to look ahead a bit further.&nbsp; Gasoline at $5 a gallon is not the scariest boogyman out there.</p> <p>And remember, if gasoline prices keep going up, other energy costs will be moving up as well.&nbsp; Diesel, propane, and other fuels that come from crude oil (like heating oil, kerosine and jet fuel), face very similar production constraints and very similar demand situations, so they'll probably move up just about like gasoline.&nbsp; Electricity and natural gas are different, but high prices for oil will encourage anyone who can to switch to alternatives, so there'll be upward pressure on all all energy costs.&nbsp; Wind, solar, and biofuels will increase as a fraction of the mix, but I don't expect them to amount to enough to hold down prices.</p> <p>It's not as hard to adapt to high energy prices as you might think.&nbsp; Look at western Europe:&nbsp; Due to high taxes, they've had gasoline prices of $8 to $10 a gallon for some time now.&nbsp; The result hasn't been as drastic as you might expect.&nbsp; People still have cars, they're just smaller and more fuel-efficient.&nbsp; People still drive to work, although few people drive as far as a lot of Americans do and a lot more use mass transit in some form or another.&nbsp; People walk more and bicycle more, and because more people get about that way, the infrastructure tends to support it better.</p> <p>That's the outline of a plan for you:&nbsp; Switch to a more energy-efficient car.&nbsp; Move closer to work (or find a job closer to home).&nbsp; If you move, move to a smaller house.&nbsp; If you don't move, improve your insulation.&nbsp; Walk more; bicycle more; organize a car pool; figure out how the bus system works in your town.</p> <p>Make a plan.&nbsp; You don't have to act on it--even if prices keep rising, they probably won't rise in a straight line like that.&nbsp; But even a sketch of a plan gives you an outline for some serious thinking:</p> <ul> <li>At what fuel price would you switch to driving a smaller, more fuel efficient car?&nbsp; How much would that car cost?&nbsp; What would your old car be worth if you tried to sell it then?&nbsp; On both the buying and selling side, be sure to take into account the price pressures of lots of other people doing the same thing.&nbsp; (I just saw a story that the <a href="http://www.usatoday.com/money/autos/2008-05-08-suvs-resale-value_N.htm">resale value of SUVs has already collapsed</a>.) Whatever your plan is, you should have enough cash on hand to put it into effect.</li> <li>How would you heat your home if fuel prices doubled or tripled?&nbsp; Selling it and moving to a smaller house isn't the sort of thing you can just do--you need enough lead time to identify a new house and to sell your old one (or rent it out).&nbsp; And, again, you need to have enough cash on hand to put the plan into effect.&nbsp; If moving isn't the plan, what else would you do?&nbsp; Turn down the thermostat?&nbsp; Close off rooms?&nbsp; Estimate how much fuel you could save and make some notes--that'll be useful information later.</li> <li>If you wanted to use mass transit, do you know how?&nbsp; Do you know where the bus stop is?&nbsp; Is it possible to get to the office or to shopping from where you live?&nbsp; What bus would you take?&nbsp; Would you have to change buses?&nbsp; (Ditto for subways, trollies, light rail, or whatever you've got.)</li> <li>Is telecommuting an option for you?&nbsp; Even if your boss would object, if your job could be done remotely, you ought to include it as a possibility in your plan--bosses who don't like the idea of remote employees might well come around if their only other options are paying big raises or having employees quit because they can't afford to drive to work.&nbsp; Start figuring out what hardware and software you'd need to telecommute.&nbsp; Learn how to use it.</li> <li>Is your job at risk?&nbsp; Or, if you own a business, are its profits at risk?&nbsp; Rising energy costs would hit everyone across the economy, but some industries (trucking, airlines, aluminum) will be hit much harder than others.&nbsp; Take a look at your own situation and adjust your plan accordingly.</li> </ul> <p>One more thing to allow for in your plan:&nbsp; Shortages.&nbsp; When constituents are faced with high prices, politicians try to &quot;do something.&quot;&nbsp; Most of the things that governments tend to do in those situations (price controls, rationing, laws against hoarding) tend to produce shortages.&nbsp; The market system is pretty well established in the US, so I expect we'll see high prices rather than long-term or widespread shortages, but your plan ought to allow for the possibility of hearing &quot;No gas today&quot; from time to time.</p> <p>People are very attached to their big cars and big houses; they're not going to give them up--and I'm not asking them to.&nbsp; What I'm suggesting is that people think seriously about how they'd adapt to higher energy costs and be prepared with a plan, just in case higher energy costs are what we get.&nbsp; The last time I wrote here about the possibility that fuel prices might get really high, more than one commenter seemed to think I was talking about a real disaster scenario--going so far as to say, &quot;If things get that bad, a lot of people are going to die!&quot;&nbsp; I'd like to gently suggest that the adaptations to $10 gasoline are perfectly possible and almost universally non-fatal.&nbsp; Having a plan will help.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> of <a href="http://www.wisebread.com/what-if-energy-costs-keep-rising">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/plan-for-expensive-fuel">Plan for expensive fuel</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/fix-energy-in-tangible-form">Fix energy in tangible form</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-much-does-it-cost-every-time-you-get-into-your-car">How Much Does it Cost Every Time you Get Into Your Car?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/rural-living-in-a-world-with-expensive-fuel">Rural living in a world with expensive fuel</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/11-budgeting-skills-everyone-should-master">11 Budgeting Skills Everyone Should Master</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Budgeting Cars and Transportation driving energy fuel fuel costs heating planning Fri, 09 May 2008 13:15:06 +0000 Philip Brewer 2076 at http://www.wisebread.com Fix energy in tangible form http://www.wisebread.com/fix-energy-in-tangible-form <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/fix-energy-in-tangible-form" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/windmill-pump.jpg" alt="Windmill pump" title="Windmill pump" class="imagecache imagecache-250w" width="226" height="400" /></a> </div> </div> </div> <p>As I&#39;ve mentioned before, I think that energy is going to be more expensive in the future. I wrote one article about <em>tactics</em> for dealing with the issue--making sure that your budget had <a href="/plan-for-expensive-fuel">contingencies for a spike in fuel prices</a>. This article is about longer-term <em>strategic</em> moves to deal with future high energy prices.</p> <p>They key problem with energy is that it&#39;s really hard to store. The <a href="/the-bank-of-gasoline-0">Bank of Gasoline</a> notwithstanding, it&#39;s tough to buy energy now and use it later. Most energy storage techniques lose a large fraction of the energy; others are expensive and dangerous.</p> <p>The only really efficient way to store energy is to go ahead and use it to create something of lasting value. So my key suggestion is to store some of the current cheap energy in the form of things you need.</p> <h2>Invest in Embodied Energy </h2> <h3>Things that produces energy</h3> <p>If you&#39;ve got the money and a location that will support it, the pinnacle of this strategy would be to acquire things that actually produce energy: windmills, solar power systems, and so on.</p> <p>Using locally-generated energy means that you don&#39;t have to buy energy from the utility. A decision on installing local power generation is often evaluated on a pay-back basis--how long will it take before the cost of the avoided purchases adds up to the cost of the system. Economies of scale make utility-generated power quite cheap compared to locally-generated power, so these payback calculations tend to steer people away from local power generation (except where you&#39;re off-the-grid and the cost of hooking up to the utility would be prohibitive). If my analysis is correct, though, and energy is going to get much more expensive in the future, a lot of these investments will be profitable sooner than a simple-minded calculation would suggest.</p> <h3>Things that let you use less energy</h3> <p>Even if you can&#39;t afford to generate your own power, anyone can invest in things that let you use less energy: a sweater, weatherstripping for your windows, extra insulation in your attic, a house that&#39;s closer to work, a bicycle, a more efficient car, furnace, air conditioner, or lightbulb. Anything that lets you live your life well with less energy falls into this category.</p> <h3>Things that embody energy</h3> <p>Take advantage of current cheap energy prices to invest in any long-lasting item that you&#39;re going to need. Most things--both items from the list above and ordinary stuff like dishes, tools, garden implements, toys and so on--are as cheap as they have ever been. And as the energy it takes to make them gets more expensive, they will get more expensive.</p> <p>Think ahead. Figure out what you&#39;re going to need long-term. When you budget for acquiring things in this category, give a preference to the items that embody the most energy, because those are the things that are going to get more expensive faster.</p> <p>That analysis is actually a huge topic of its own. It&#39;s hard to calculate the life-cycle energy requirements for an object, because there is not only the energy involved in making the object--aluminum and glass, for example, embody more energy than iron--but there is also the energy involved in the infrastructure. The energy embodied in the the silicon of a computer chip is dwarfed by the energy it takes to build and maintain the refineries needed for the raw materials, the wafer fab that made it, and the schools and universities that trained the people who build and run them. But a seat-of-the-pants sort of analysis will generally be good enough to let you put items like this into roughly the right order.</p> <p>Anything that takes a lot of energy to make will be more expensive going forward. If you need one, work it into your budget to buy it soon, while it&#39;s still cheap.</p> <h2>Caution on Investing in Energy Companies </h2> <p>I put investing in companies that produce energy in another category altogether.</p> <p>A lot of people have made a lot of money in the past few years by investing in companies that either produce energy (such as the major oil companies) or else use energy more efficiently than their competitors (such as railroads). I think a lot more money will be made in companies like these over the next few years as well, but a lot of money will also be lost. Making money in big companies depends on a lot of other things going right. The overall economy needs to hum along reasonably well, or else these companies will tank along with the stock market in general. The government needs to refrain from tagging these companies with price controls, excess profits taxes, and other profit-sapping measures.</p> <p>Unless you have good reason to be confident in your forecasts of economic conditions and government actions, I&#39;d limit your investments in these areas.</p> <p>I&#39;d suggest the same general policy for investments in things like energy futures. I don&#39;t doubt that a lot of money will be made in energy futures over the next few years, but here too, a lot of money will also be lost. Prices never move in one direction forever, and a fairly small zig or zag can easily wipe out many years of profits in a matter of days, and you can&#39;t count on the government or the markets to play by the rules when conditions get disordered. </p> <h2>Conclusion</h2> <p>I think the safe and easy win here is in just buying the stuff you&#39;re going to need anyway, giving a priority to the things that produce energy, save energy, or take a lot of energy to make. If you buy stuff you need, you can hardly lose. And if you prioritize things as I suggest, you&#39;ll come out well ahead. </p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> of <a href="http://www.wisebread.com/fix-energy-in-tangible-form">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/as-the-wood-burns-the-top-3-biomass-heating-sources-revealed">As the Wood Burns: The Top 3 BioMass Heating Sources Revealed</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-if-energy-costs-keep-rising">What if energy costs keep rising?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/living-cheaply-for-the-long-term">Living Cheaply for the Long Term</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-money-leaks-you-need-to-plug">7 Money Leaks You Need to Plug</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/plan-for-expensive-fuel">Plan for expensive fuel</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Frugal Living alternative energy energy fuel fuel costs fuel efficiency Tue, 21 Aug 2007 00:25:23 +0000 Philip Brewer 1026 at http://www.wisebread.com Rolling Stone article on ethanol http://www.wisebread.com/rolling-stone-article-on-ethanol <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/wisebread_imce/corn-truck.jpg" alt="Corn truck" title="Corn truck" width="399" height="375" /></p> <p>In my recent post <a href="/plan-for-expensive-fuel">Plan for expensive fuel</a>, I mentioned sustainable fuels in a somewhat dismissive fashion. I&#39;ll have more to say about that eventually, but in the meantime, I wanted to link to Rolling Stone magazine&#39;s excellent article on the limitations of ethanol as a replacement for fossile fuels:</p> <blockquote><p>The great danger of confronting peak oil and global warming isn&#39;t that we will sit on our collective asses and do nothing while civilization collapses, but that we will plunge after &quot;solutions&quot; that will make our problems even worse. Like believing we can replace gasoline with ethanol, the much-hyped biofuel that we make from corn.</p> </blockquote> <p><a href="http://www.rollingstone.com/politics/story/15635751/ethanol_scam_ethanol_hurts_the_environment_and_is_one_of_americas_biggest_political_boondoggles/1"><em>Ethanol Scam: Ethanol Hurts the Environment And Is One of America&#39;s Biggest Political Boondoggles</em></a> </p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> of <a href="http://www.wisebread.com/rolling-stone-article-on-ethanol">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/plan-for-expensive-fuel">Plan for expensive fuel</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/fix-energy-in-tangible-form">Fix energy in tangible form</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-if-energy-costs-keep-rising">What if energy costs keep rising?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-two-mile-challenge">The two-mile challenge</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/rural-living-in-a-world-with-expensive-fuel">Rural living in a world with expensive fuel</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Extra Commentary ethanol fuel fuel costs transport Fri, 03 Aug 2007 02:03:07 +0000 Philip Brewer 943 at http://www.wisebread.com Plan for expensive fuel http://www.wisebread.com/plan-for-expensive-fuel <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/wisebread_imce/fuel-prices-1.jpg" alt="Gas station sign" title="Gas station sign" width="400" height="300" /></p> <p>Does your budget include a contingency for fuel to get much more expensive? Because it ought to.</p> <p>I learned about the need for contingencies early. My first attempt at setting up housekeeping took place in 1980-1981, right at the peak of an inflationary spurt that saw the consumer price index grow at 14%. My budget was completely destroyed by prices that went up by more than 1% per month.</p> <p>So what&#39;s your contingency for a spike in fuel prices?</p> <p>For a few people who live in cities and walk or take mass transit, fuel is a small percentage of the total spending--small enough that a even a big increase in fuel prices won&#39;t break the budget. If you&#39;re not one of those people, you should either have a plan to take money from somewhere else in the budget, or else you should have a plan to reduce your driving if necessary.</p> <p>What other line item can you take money from? Discretionary money--entertainment and the like--has usually already been cut to the bone in the initial budget-making process, so there&#39;s not much money to take from there. The closest thing most people have in their budget for contingencies is the money that&#39;s going into savings--and taking the money from there is a terrible idea.</p> <p>That leaves reducing driving. Reducing driving in the short term is hard, but there are ways:</p> <ul> <li>combining trips--always a good idea anyway</li> <li>carpooling and other forms of ride sharing</li> <li>telecommuting</li> <li>bicycling or walking</li> <li>using mass transit</li> </ul> <p>In the longer term there&#39;s the opportunity to take more drastic action, such as moving closer to work or making investments in fuel economy, such as a more efficient car. (A moped, scooter, or motorcycle would be cheaper than any new car and much more fuel-efficient as well.)</p> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/wisebread_imce/fuel-prices-2.jpg" alt="Electric meter" title="Electric meter" width="330" height="247" align="left" />When making your contingency plan, remember that transportation fuel is not the only kind you need to pay for. Heating and electricity rates will go up right along with transportation fuel costs. </p> <p>This means that another part of your contingency plan should be energy-saving measures you can take at home: better insulation, adjusting the thermostat, etc. Even better, make the changes now and put the savings into a contingency fund. </p> <p>Also, don&#39;t forget that fuel price increases tend to drive price increases in everything else as well, starting with food.</p> <p>I&#39;m making a big deal out of this because higher fuel prices are in the cards. Fuel prices will go down as well as up, but the long-term trend will be up. According to the US <a href="http://www.eia.doe.gov/">Energy Information Administration</a>, only three out of the top ten oil producing countries showed increases in production in 2006 over 2005. None of them showed significant increases and the two biggest (Saudi Arabia and Russia) both showed clear declines. In fact, total <a href="http://feeds.feedburner.com/~r/theoildrum/~3/128101984/2693">world production of oil</a> has been flat since 2004.<img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/wisebread_imce/fuel-prices-3.jpg" alt="Gas meters" title="Gas meters" width="339" height="210" align="right" /> </p> <p>Just as important as flat production is increases in consumption, especially in oil-producing countries. In part because of increasing domestic use, only two of the top ten oil exporting countries showed an increase in exports in 2006 over 2005. </p> <p>We will no doubt continue to increase production of renewable fuels like ethanol and biodiesel, but it&#39;s an open question how much of the gap between flat supplies and growing demand can be filled by renewables. Your contingency plan is for the very real possiblity that any gap will push up fuel prices. </p> <p>As I said, fuel prices will go down as well as up. There&#39;s a lot of low-hanging fruit in the US for conserving fuel. When prices get high enough, people will make the necessary changes, and many of those changes (moving closer to work, buying a more fuel-efficient car) will produce long-term reductions in demand--reductions that won&#39;t be quickly reversed, even if fuel prices drop. And, sometimes, that reduction in demand will be enough to produce a real drop in prices, but those drops in price won&#39;t come when you need them to save your budget. They&#39;ll come when you&#39;ve finally given in and adjusted your fuel use to the new reality.</p> <p>How will you handle higher fuel prices? You need to have a plan.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> of <a href="http://www.wisebread.com/plan-for-expensive-fuel">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-if-energy-costs-keep-rising">What if energy costs keep rising?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/rolling-stone-article-on-ethanol">Rolling Stone article on ethanol</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/rural-living-in-a-world-with-expensive-fuel">Rural living in a world with expensive fuel</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-save-an-extra-109486-a-year">How to Save an Extra $1,166.49 a Year</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-long-does-it-take-break-even-with-an-electric-car">How Long Does It Take to Break Even With an Electric Car</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Budgeting Cars and Transportation electricity fuel fuel costs heating transport Sun, 29 Jul 2007 20:34:27 +0000 Philip Brewer 920 at http://www.wisebread.com