What will you do when gas drops below $1.50 a gallon?

by Paul Michael on 11 November 2008 42 comments
Photo: Sociate

Several months ago, I wrote an article asking what you would do when gas prices skyrocketed. Now, the price of gasoline is in freefall. It’s already dipped below $2/gallon in some parts of my state, and I’ve heard it has already gone as low $1.67 in some parts of the country. The question is, will this change anything for you?

When I arrived in the states, a gallon of gas was just over $1. So, the difference between filling a 12-gallon tank or a 25-gallon tank once a week was clearly no big deal for most people.

Coming from the UK, I was surprised at how many massive vehicles were on the roads here: Hummers; Suburbans; F-150s; Escalades. The list of low MPG tankers with huge fuel tanks staggered me. But hey, in America it’s everyone’s right to drive whatever they want. Hybrid technology was laughed at and electric cars were dinky little toys that could never be taken seriously.

Fast-forward to the middle of 2008 and gasoline jumps over the $4/gallon mark. The 25- gallon tank now costs $100 to fill. Car dealerships can’t sell SUVs and trucks without offering enormous discounts and free gas for a year. Drivers are on waiting lists for Hybrid cars. People are embracing ride-share and public transportation (they’re even starting to walk more and ride bicycles). A new word called “hyper-miling” became all the rage. The signs were all pointing to the end of an era; SUVs and trucks would now only be bought as a necessity, not a fashion statement.

gas chart

But as you all know, the economy encountered a small hiccup in September. Did I say hiccup? I’m sorry, I meant heart attack. A big one. And as our stocks and 401Ks plummeted, so did the price of gasoline; a very thin silver lining in a big, bad, dark cloud. For the first time in years, gasoline is once again becoming one of the cheapest liquids we can buy . You can see drivers smiling as they fill up the tank. Truck owners no longer have that eye-twitch as they pull into a gas station. But what will this mean long-term?

Will the dip in gas prices affect you? Are you no longer considering a Hybrid vehicle, or are you at least putting off the purchase for a few more years? Are you driving more? Is the morning commute now made in your own car rather than a bus or train?

Personally, I am staying on the same path. That old saying of “once bitten, twice shy” seems quite apt right now. Too many people that I know bought gas-guzzling SUVs and trucks only to see their weekly gas expenses quadruple over the last eight years. And just because we’re experiencing a delightful dip in prices, it doesn’t mean the energy problem has vanished.

the future?

Fossil fuels are limited. Oil is becoming more expensive to extract and refine. We need to look to a future that does not need gasoline like a junkie needs his next fix. I will continue to hyper-mile and drive only when I need to. I will never buy a gas-guzzling truck or SUV. And our next family car will almost certainly have Hybrid technology and get great MPG. This is no time to forget the troubles of the last few years. We may have been given a little time to catch our breath, but we cannot afford to be seduced by the lull in gas prices. Sooner or later (and probably sooner) they will rise again. Be prepared.

Additional photo credit: Chrystal
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Guest's picture
Guest

I didn't actually change anything about my driving/fuel consumption when prices were up around $4. My car is relatively fuel efficient. I'm not interested in a hybrid, and you honestly would not be able to convince me to take public transportation or carpool.

The biggest issue I saw with the rising fuel prices was not the hit at the pump for me, but rather the increase of the price of goods and services (which I don't see going down correspondingly). What I *have* changed is how carefully I shop and where I shop.

Guest's picture
Ann

We have a fuel efficient car, but my husband has a 70 mile round trip commute. We also buy gas for our college-age son (he's doing a City Year during a gap year). We're probably save about $100/month or so with the new prices; the savings will go toward paying down debt.

Guest's picture
Matthew

Hey! I just found your site via 9rules. Nice post. Two comments for you: 1) I like the 'about the author' box under your post, 2) when you tab down your comment form it does not flow correctly.

Guest's picture

I'm trying to keep to a limited amount of driving. It was a priority that moved up a notch when gas prices soared. It's still a priority, but I'm one of those saddled with a mate who is considerably less conservation- and frugal-minded than I am. For the sake of domestic harmony, I can't be too shrill about this. But it's gotten to the point that I see frivolous driving as downright immoral. I just try to bunch up my errands as much as possible.

I may try to talk him into a car-free challenge, and see how long we can go without driving anywhere. We live in a semi-rural area with no public transportation. So it would be a real challenge.

Guest's picture
Barbara

Even though I don't drive a ton to begin with, I'm with Ann as far as putting extra gas money each month towards paying down my debt. Any extra pennies at the end of each month go towards that goal.

What's frustrating to me, and I hope this changes soon, is that food prices, etc are not going down with the price of gas. I guess corporate decision makers are enjoying the sudden extra profits?

Guest's picture

I'm one who has seen the recent drop to $1.67 a gallon and I'm thrilled. But I'm still trying to drive less, consolidate trips, hyper-mile, etc. I don't see any reason not to, now that I'm in the habit of it. Not to mention that I don't expect the prices to stay this low for long.

Guest's picture
jared

If gas gets really low, say the $1.20 range, I'd want to get a bunch of friends, form a cooperative, buy a gas station, and bid for 10,000 gallons on the commodities market. Have it delivered for to the "coop gas station". I don't know the details of how that would work. But, that's what I would want to do. Anything to hedge against another swing up to $4. If the economy keeps going the way it's going now we'll eventually see hyperinflation and $4, 5, or 6 gas again.

Guest's picture
Guest

@ Jared
So how do you intend to keep all that gas stored without significantly raising the cost? Insurance, equipment, shipping, storage, security, taxes, interest on the upfront cash it would take to buy that much gas, not to mention all the environmental regulations for storing that much gas.
I think there's an infrastructure in place to do all that. And it's driven by market conditions that allow for all that overhead, distribution etc.
I'm betting it would drive your $1.20 a gallon to about $3.60 give or take depending on which state.

Guest's picture
Kim

On one hand, the lower prices make my monthly budget a bit looser which means I can shuffle more into my current emergency savings goal. On the other, I don't drive very much because I live within walking distance of my office, so I'm only in the car once a week or so to head up to the next city over for cheaper groceries, etc. So, I only fill up the tank about once a month or so. But, if it stays this way through the holidays (forlorn hope, I suspect), it'll make a difference in my holiday travel, since I'll be going to my parents' house, which is about 140 miles round trip, several times over the 6 weeks between Thanksgiving and New Years. I can usually make the round trip on a little less than half a tank, but I'll be doing it more than usual.

Guest's picture
Guest

I'll find someone to blame: an administration, a political, an "face-less" corporation. And while I'm at it, I'll sell my perfectly good 5 year old car and smugly buy a NEW battery powered car that poisons the water burns a hole in the ground and instead of the atmosphere....oh wait that's what I did when gas was $4.39 a gallon.
Never mind.
I'll find a new cause to hate on and believe everything politicians and the media want me to believe.
Oh wait, I just did that too.

I guess I'll do nothing.

Guest's picture
gt0163c

My driving habits haven't really changed all that much with the fluctuations in gas prices. I bought a new fuel efficient car two year ago to replace my aging truck. Although that was more out of a desire for more passenger space. The added fuel efficiency was a nice bonus.
I generally don't do a lot of driving (~350 miles, 1 tank, every two weeks or so), so even when gas prices were higher, it didn't effect me as much as it did many others.

But, with lower gas prices it will be nice to be able to go to lunch with friends in Dallas (a 70 mile round trip) on the weekend, without having to factor in the extra $8-$10 for gas.

Philip Brewer's picture

If gas prices get down under $1.50 (and stay there), it'll only be because the economy goes down the tubes (and stays there).  So, I expect that most people would respond by pinching pennies and economizing on everything--including cheap gas--simply because they'd be worried about their job, if they're lucky enough to still have one.

Guest's picture

In our area, gas prices are above @2.50/gallon, but that's still well below the high prices earlier this year.

My husband has commuted by bike for about 18 years now, and I've been taking the bus for nearly 3. We've moved to a location that gives us a longer commute, and we're still planning to use some combination of bikes and buses. I may drive to the bus stop a mile away, depending on weather and health, but most days I won't use the car even for that.

Our home is reasonably close to a supermarket and a Sunday farmers' market, and we'll get to both by bike unless we need too many items for the panniers.

There are plenty of occasions on which we'll drive, but money is only one of the resources we want to conserve. Relative location to amenities played a major role in our house hunt; there's no reason not to make the most of that now that we're here, even if gas is cheaper.

Guest's picture

Being a student I already had to choose between gas and food, now that gas is cheaper I can eat full meals again!

Guest's picture
GE Miller

Seriously, this has a small impact on our finances, and when it comes down to it, we all suffer in the long run when gas prices are this low and it pushed buyer behavior back to large gas guzzlers. I was loving $4 a gallon gas. Innovation was being forced through. Now, it's a side note. Of course, I'm a lot more comfortable saying all of this because I only use about 10 gallons a month.

Guest's picture
FrugalZen

thing.

I bought my motorcycle back when gas was under $1.50 a gallon and its nice to be able to fill the tank for $6.00 for a weeks driving instead of $12.00.

I still remember the day the cost passed $10.00...May 10, 2008...was I P*ssed.

The savings go into just that...Savings...Vangaurd here comes another check!!

~ Roland

Guest's picture
Jim

If gas drops further then I'll take my old car out for a spin more often. I have a 1967 classic car that only gets about 10MPG. With gas over $4 I wasn't driving it much given the costs.

Otherwise I won't change my driving habits at all. I'll still look for a fuel efficient car next time I buy. We hit $4 a gallon once so it can get there again.

Guest's picture

Even though gas prices have fallen, I'm still trying to resist the urge to drive to work. Even though gas prices are delightfully cheap right now, there is still the cost of parking, and mileage, not to mention environmental impact!

Guest's picture

Every time I get excited about some super low mpg vehicle in the news, I'm quickly disappointed by follow-up reports that say that the vehicle will not be sold in the U.S. (if at all)! Granted, I can't afford to replace my vehicle yet, but I've been trying to picture my dream car for years and I don't feel like I have many options, especially if I don't have a lot of money come purchase time.

It's worse for those, like my mom, who live in rural areas and often need a more powerful vehicle. She'd love it if her SUV got better gas mileage. It's not like she wants to spend more money on gas on her very low, fixed income. But, she needs a vehicle that can haul heavy stuff around. For her, a high price of gas means worrying about how much of her own necessities she has to sacrifice so she can take her friend to dialysis treatment. A lower price is at least some help.

As for me, my driving habits won't change much. I hardly drive at all since I work from home. (My husband and I actually share a vehicle.) And regardless of the price of gas, I still want my greener vehicle. However, I hope that the lowering gas prices will positively affect other things -- like the cost of food.

Guest's picture
Mike McCurdy

Lower gas prices benefit people who take public transportation too. After all, transit authorities have to pay for fuel for their buses, and their budgets took it up the ass this year. Some are talking about raising fares. So if gas stays low, it will benefit the pocketbooks of those who don't drive.

Guest's picture
Rachel

I'm usually all for change, but there is absolutely no reason for us to change our driving/gas consumption habits now. For me, gas prices going down simply means that I'm saving money every week. Buying a bigger car would be pointless (and who can afford the car payment anyway?).

Guest's picture
Robyn

I will continue to conserve. I already do for enviromental purposes, and while it is so nice for it to be cheap for the time being, I would rather save that extra money that I'm not using on expensive gas for more important things like bills.

Guest's picture
Tim

I got a chase credit card about 2 months ago that gives me 6% cash back on gas and i'm lovin'it. I got one more month left with this deal and i already plan on getting another with similar deal. I found it here:

http://www.cardz.com/Compare_Credit_Cards/Gas_Auto

Guest's picture
Jen S.

What will I do if gas drops to $1.50/gallon? I'll save money at the pump! I'm not going to start driving more. My car is already painfully fuel-efficient (I can't get it to perform worse than 30mpg if I try) and I already bike, walk, or use public transportation when available. As we all should. :) It's not only less wasteful, it doesn't only keep traffic down, but it gets you out there into the world, into your neighborhood, into other neighborhoods, and closer to your fellow men and women.

Guest's picture
Ray

As far as I could tell (and the media were practically no use, here) the price of gas rose because of wall-streeters playing the futures game with oil. When the economy tanked and the risk-takers started to pull in their risk-taking, the futures market in oil stopped being lucrative. As the future, as it were, of oil prices stopped rising meteorically more and more pulled out, and the process of investors removing their money from a market is that the prices drop. Futures only work when the prices are rising.

So it looks to me like oil prices (and gas prices as a result) were artificially inflated by futures gamblers, and has been artificially un-inflated by them going away. At no time during the crisis was there a credible report that supply was down or that demand was up! The best I can tell, gas futures trading was the third wave of the Telecomm bubble-burst, with the realestate bubble being the second wave.

Since the economy really didn't work on the basis of supply-and-demand, it's hard to claim that the economy must be going bad if gas prices drop: quite the contrary, rising gas prices, divorced from the economy, was driving the economy bad. Now that gas prices are falling, prices of shipped/trucked goods will also fall, the airline industries (which seemed headed for its deathbed) may recover enough that you don't have to pay more to check your baggage than your suitcases cost to buy, and our household budgets will seem to grow.

Frugality is good, and in its way this period of high gas prices forced a lot of folks to abandon profligate habits, which is also good.

For me, I'm seeing my 100-mile-a-day commute (the nearest work I can find) is becoming only outrageously expensive, rather than deadly-expensive.

Guest's picture

sometimes people make silly choices in an attempt to be frugal. why would anyone trade in their old car(if less than 5 years old) to buy a hybrid is beyond me. thats penny-wise & pound foolish!where do you think the old car might go?eventually many of the old vehicles being traded in will wind up in landfills. the chemicals in the batteries, fuel lines and motor will go into our water supply . are we really"saving"anything?
I will keep my car, combine trips,"staycation" more, and re-use, recycle, & re-think!

Guest's picture
Guest

@ nirvanadiva
100% Agree. I think it's best called irrationality. And seems to be plenty of it to go around, especially if you watch or read the news on a regular basis.

Guest's picture
Mom of 6

When I read the title, all I could think of was, "What will I do? I'll DANCE!" Being disabled in the legs, this is a bold statement indeed. What I have already done, though, is to open a savings account. $2.50 a gallon is my "comfort zone." Anything above that and I start curtailing trips out of the house. So, on fill up day, I get a $62.50 allowance to fill my car. Whatever is left goes directly into the savings account (I fill up at the gas station that shares a parking lot with my bank) do-not-pass-Starbucks on the way. Someday, that money will be used to make up the difference when gas prices go back up.

Guest's picture

I agree. I refuse to be duped.

1) starting to drive excessively is bad for the environment. Those of us who care should drive even less now that others are driving more.

2) Prices will go back up. Mark my words. It's bad to get used to low prices again. Don't be fooled! You're right, "Once bitten, twice shy."

I'm still planning on selling my car for the superior bicycle. Not even $1.91/gal can convince me!

Guest's picture

If gas drops to $1.50, I will only be filling up my tank once a week and traveling a little bit more than I have currently been.

Guest's picture
Guest

While I'm enjoying the lower prices for now, I have absolutely NO DOUBT they will go back up. There's no way they will stay down. So, nothing changes on this end. I still plan to get a much more efficient car for my next one (I drive my cars into the ground, I should have another five years on this one). I consolidate my driving as much as possible, drive slowly for the improved mileage and so on. It's just nice not to have my eye twitch at the gas station for now ;-)

Guest's picture
Degilbo

Good to read that fuel prices are falling up your way. Down-under (i.e. Australia) they have fallen this week to around AUD1.15 a LITRE. Now that may look cheap - and it does to us after highs of a AUD1.50 - but there are 4.55 litres in a gallon. That means our fuel price - per gallon - would be AUD5.23. At today's rate of conversion that equates to USD3.32 a gallon - twice what you are now paying. Our biggest problem down here is that the fuel retailing is in the hands of the two big supermarket chains (they control 80%+ of the food trade), so competition is stifled.

Guest's picture

I put the same amount of money for gas each month into my short term savings account. When gas prices are down, it builds up an excess that I can use for when gas prices are up. If I ever go negative, I will adjust the monthly amount up to something more appropriate. I conserve as much as possible through the usual proven ways: Keep vehicle tuned and maintained, drive and accelerate calmy and consistently, combine trips, reduce trips, and carpool.

Guest's picture
Lisa

We were already using public transportation and combining trips before gas prices skyrocketed, so things really didn't change much then, and they won't change much now, either. The big difference will be a little more money in my budget! I don't see any reason to be wasteful, though, now that gas is cheaper.

Guest's picture
Guest

you guys are so lucky!
i live in germany and we pay 1,20 pr litre which is about 6,8& per gallon..

in summer prices here were up to 1,60 per litre!

Guest's picture
Guest

I have never really been one to drive around aimlessly. I have always bundled my errands together, and walked when possible. We are really noticing the savings in our travel though. We have a travel trailer (RV) and it cost us nearly $500 to tow it 500 miles earlier this summer and we just picked it up to bring it home and it cost us half that this time! We are using the savings for an extra weekend at our next destination...and putting the rest under our mattress...ha ha. We are not driving more, just enjoying where we go for longer.

Guest's picture
Guest

I should note, that $500 includes towing one way and returning home with out the trailer in tow and now we traveled up to get it and towed it back.

Guest's picture
Guest

NOPE!

Guest's picture
lever

I bought a Honda Civic in the spring of 2001, and a significant part of that choice was based on fuel economy. So, I've been, perhaps, less affected than most during this entire oil price run up. I have never driven a lot more than necessary, 200 miles to and from work every week, perhaps 20-200 miles for incidentals on the weekend depending on my plans. But, even I changed by driving habits during the last year to year and a half. I combined more stops. Delayed some travel that could wait until another trip took me close to that location. Ultimately, that didn't knock a lot of my already fairly frugal driving, but it took of maybe 50-75 miles a month. I would say that with gas now approaching $1.50/gal (it is presently $1.62 at the station closest to my home), I am making some of those discretionary trips again, but only after some deliberation.

Guest's picture
lever

I think the biggest falling fuel costs will do for me is free up a little more money in my budget each week. I have spent less and less on discretionary items. Also, the rising cost of food has had an impact on my budget as well, and that is likely to lessen for a time as well. This added room in my budget will allow me to have a little more money for discretionary items. I might save a little of that money, but I never stopped saving during this time. Saving is one of the last things I would want to cut from my budget. Maybe this change will allow me to put a little more money into the hands of businesses other than oil companies.

Guest's picture
Guest

I can't believe I just filled my tank with $23 for 14.64 gallons. Compared to 3 months ago where I was paying $55. Seems like a dream, unfortunately for my frugal living status, i'm now driving more, longer, further, higher speeds.. (no more 55-60) i'm back on the fast lane! AHHH!!!