The fixation of modern American society on the price of gasoline at the pump is amusing. The local newspaper frequently runs front page stories when the price of a gallon of gas changes by more than a few cents. Gasbuddy.com tracks gas prices to 4 significant digits, as if my transportation decisions would be altered were the price to change from $3.362/gal to $3.363/gal. Republicans and Democrats alike seem to agree-the price of gas is TOO HIGH! The President should do something about it!
So, how expensive is gasoline? One way to quantify this question is to compare the cost of gas to the total cost of operating a typical car, which is: 59.6 cents/mile as of 2012, according to the American Automobile Association. That's a shocking number--can it be right? Does it really cost me 6 bucks to drive across town?
Well, the AAA probably knows what it's talking about, but the AAA is not an unbiased observer so perhaps that number is exaggerated. We can however check to see if that number is reasonable if we remember that the IRS is evil. We can all agree on that. Since the IRS is evil, and since automobile travel is deductible for business expenses, volunteer work, etc., it follows that the IRS would never exaggerate its reimbursement rate for automobile usage. We can therefore take the IRS mileage reimbursement rate to be a lower limit on the average cost per mile of operating a typical vehicle. What is the IRS rate? 56.5 cents per mile for business expenses! Surprisingly--suspiciously--close to the AAA number.
The next thing number we need in order to figure out how expensive gasoline is is the "gas mileage" of the average vehicle. Data from the Federal Highway Administration for cars extrapolate to 23.3 mpg for 2013. (23.0 mpg in 2010, with a trend of 0.1 mpg/year to get 23.3 mpg in 2013).
Now we can get an idea of what fraction of the cost of car ownership goes to gas. At 23.3 mpg, and $3.36/gal, it costs 14 cents/mile for gas. What!?! Compared to the total cost of ~56 cents/mile, that means the cost of gas is only 25%, 1/4, of the cost of driving a car. If the price of gas doubled--a hypothetical event that the newspapers would no doubt describe in the most apocalyptic of terms-- the cost of owning a car would increase by only 1/4.
Gasoline is dirt cheap.
This reminds me of an old Bloom County strip. "Louise, dump the milk. The cat drinks unleaded from now on!"
Either the fuel's true cost is far higher or petroleum-fueled vehicles are grossly inefficient! Or both!
ReplyDeleteThe true cost would indeed be higher were we willing to charge ourselves for the irreversible loss of this valuable commodity. We are willing to be inefficient in our use of gas because of its low cost. A more realistic gas tax (I will give a proposed number in a future post) would greatly encourage better designs and much more efficient usage of petroleum.
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