This Is How the High Cost of Cheap Gas Hurts You

By Emily Guy Birken on 28 January 2016 0 comments

When I first started driving in the mid-1990s, gas prices generally hovered around $1.25 a gallon, and I could fill up my Chevy Cavalier with just $20 — and receive change back.

In the last few years, it seemed as though the $20 fill-up was a thing of the past. That's why the last several months have been pretty exciting for drivers, as gas prices have once again dipped below $2.00 a gallon and stayed there. And why shouldn't we be excited? Low fuel prices means cheaper goods and services, as well as fat wallets.

But that's not the whole story. While cheap gas certainly does help to stimulate our economy and improve household budgets, there is a dark side to the cheap gas. The low prices can often mask high costs elsewhere in the economy or the future. Here are four reasons why cheap gas costs more than you think.

1. Buying More Car Than You Need

Human beings have a hard time recognizing that things change, even when we have recent experience that tells us otherwise. This is called the forever changeless assumption, and it's the reason why drivers flock to large gas-guzzlers when the price at the pump is low, and then race out to buy hybrids when prices spike. The rise of fuel-efficient Japanese cars in the '70s and early '80s, followed by the ubiquity of SUVs in the '90s, then the rise of the hybrid in the 2000s, has lead us to this point.

The problem is something that automotive auctioneer and Yahoo Auto contributor Steven Lang refers to as "the 1% solution." Drivers will buy a vehicle because they are trying to solve a problem that only plagues them 1% of the time. For instance, when gas prices are low, a car buyer might focus on the need to haul the entire extended family and buy a three-row minivan, even though the family only makes family visits once a year. When gas prices go up, worries about the price at the pump make car buyers chase fuel economy and ignore the higher sticker price on the efficient car.

You might be thinking that this issue is relatively rare. Except for the Richie Rich types, not many people buy cars every couple of years, and the majority of drivers keep their gas-guzzling vans during periods of expensive fill-ups or keep their hybrids even when a gallon of gas is cheaper than a gallon of milk.

But America's fleet of cars is older now than it has ever been with a remarkable average age of 11.5 years. Though the cars produced in the past 12 years are durable, they will eventually need to be replaced. Americans were already buying cars at record rates in 2015, and the trend is expected to continue.

That's not to say that you'll jump from driving a Honda Fit to a Ford F-350 just because gas is cheap. According to Steven Lang, "Car buyers tend to take two steps to the right when gas prices are low. If they would normally look at a sub-compact, they'll buy a sedan instead."

The problem with the 1% solution is not just the sticker price, which tends to be higher on larger vehicles. Everything from the cost of regular maintenance to the price of tires goes up with larger cars. And there is no guarantee that cheap gas will remain forever changeless — and good luck unloading your gas-guzzler when the price of oil spikes again.

2. Wear and Tear on Your Vehicle

There is some debate as to whether consumers are likely to drive more when gas prices are low. One study has shown that Millennials in particular are likely to drive more when the cost of gas is low, while the Energy Information Administration (EIA) claims that gasoline is an inelastic resource, which means demand does not change when prices fluctuate.

However, AAA calculates that 46.6 million Americans traveled for Thanksgiving 2015, which is the highest number of travelers for that holiday since 2007. The low cost of gas certainly played a factor for many travelers.

But driving more — even if it's just additional, special occasion driving — does put wear and tear on your car. Calculating the exact cost of wear and tear is difficult, but AAA found the average cost per mile in 2014 to be 44.9 cents per mile for a small sedan driven about 15,000 miles per year. (This cost does include the price of gas.)

3. Traffic Fatalities

Driving your car more is not just potentially costly for your vehicle. It also increases the statistical likelihood that you will get into a wreck. According to sociologist Guangqing Chi of South Dakota State University, a 20-cent decline in gas prices in Minnesota correlated with an additional 15 traffic-related deaths per year. He surmises that a $2 drop in gas prices could translate to an additional 9,000 traffic fatalities per year nationally.

There are a number of reasons for this. Cheaper gas means drivers often take more trips — both long road trips and regular errands — rather than staying home or combining local trips to save gas. In addition, the fluctuating cost of gasoline has a larger effect on young drivers. When gas prices are low, there are more young and inexperienced drivers on the road since they can afford a tank of gas — and those are the drivers who are at the greatest risk of being in a car accident.

4. Environmental Concerns

We all know that driving is not great for the environment. Not only do the emissions of hydrocarbons, nitrogen oxides, and carbon dioxide from each and every tailpipe contribute to ground-level ozone and global warming (not to mention the human health implications of carbon monoxide), but the production of fuel creates a significant amount of similar emissions, accounting for 19% of the emissions produced during the life cycle of the average car.

This is problematic both because cheap gas can potentially encourage more driving, and because low prices at the pump make society as a whole less interested in fuel efficiency. According to Michael Sivak, research professor at the University of Michigan Transportation Research Institute, "Fuel economy for new cars, light trucks, and sport utility vehicles rose fairly steadily from 20.1 miles per gallon in October 2007 to 25.8 MPG in August 2014… [but] since then, fuel economy of the new-car fleet has reversed course, dropping to 25 MPG in November [2015]."

Even environmentally-conscious consumers are less likely to make decisions in the best interest of the earth when gas is cheap. Without the immediate pain of costly fill-ups, it can be difficult for drivers to remember that every trip they make contributes to the deterioration of the environment.

Striking a Balance

Cheap gas is not as cheap as it may seem, since our behavior adjusts to low prices in ways that can be very costly. It's a good idea to think of gasoline as an expensive and precious resource, even when a gallon costs less than a bottle of water, since that will help you to remember the hidden costs.

Do you buy cheap gas? Share your opinion on this trend in the comments below!

0
No votes yet
Your rating: None
ShareThis

Disclaimer: The links and mentions on this site may be affiliate links. But they do not affect the actual opinions and recommendations of the authors.

Wise Bread is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com.