Gas Pains?

Gas Prices are once again on the rise. I don’t usually pay much attention to the price per gallon because I drive where I have to go. I am not joy riding often. but I tend to fill up my tank when my vehicle says I have about 50 miles to go. I probably shouldn’t let it get down so low. It is probably a much better idea to fill up more often and always have an over half full tank. I just don’t do it. Well I have really taken notice over the past month because the total cost has obviously risen. It got me thinking about how it seems it is an every year occurrence of gas prices spiking then coming back down giving us the illusion gas prices are always rising when they really are not. Of course, the media helps to drive our feeling because of their constant “coverage” of spiking prices at the pump. A little research led me to what I believe is a great economics website called Number Nomics. Here is what Steve Slifer has to say about current gas prices…

Oil Prices.  Most economists seem to put this at the top of their list of concerns.  Clearly, rising gasoline prices capture a lot of attention in the press.  Most economists suggest that this factor could result in substantially slower growth in the quarters ahead.  While higher gasoline prices will probably shave a few tenths of a point off of GDP growth, the increase thus far should not be too problematical for several reasons.  First of all, last year gasoline prices rose 50% and reached $4.00 per gallon.  That spike in prices was alarming.  This year gas prices have once again hit $4.00 per gallon, but the increase since yearend has been one-half that amount.  Because gasoline has tested this level previously and we survived, it somehow seems less threatening.  Keep in mind that the stock market and consumer sentiment are currently at their highest levels thus far in the cycle despite rising oil prices.  Second, gas prices always rise in the first half of any year in advance of the summer driving season, but then reverse direction and decline in the second half.  There is no reason to think that this year’s performance will be any different.  Third, some of the sting of rising gasoline prices is being offset by an equally impressive, but less discussed, drop in the price of natural gas.  In our opinion, gasoline prices will have to rise much farther to, say, $5.00 per gallon to present any meaningful impediment to growth. (read more)

No wonder I felt like the spike of gas is an annual occurrence. I also thought I would look back over my 2011 spending on gasoline and compare it to this year so far (yes, I do track it). Here are our (my wife and I) gasoline costs from last year.

Jan $182, Feb $210, March $335, Apr $430, May $500, Jun $434, Jul $416, Aug $436, Sept $390, Oct $384, Nov $367, Dec $357

We averaged $370/mo in gasoline costs. Since these numbers don’t take into account things such as how far and often we traveled there is not too much to be gained from the info. But, I can see a trend mirroring the excerpt from the article above. Our highest costs seemed to be from April-June. I suspect this year will be similar.

So what does all of this mean? First, don’t freak out about gas prices going up and reaching $4/gallon. It seems to be a regular occurrence in the Spring. Second, plan on spending more in the Spring and Summer. Obviously, you are likely traveling more during the middle months of the year but it is also likely gas prices will be hire. Let’s not act shocked and surprised by it.

Matthew B. Brock, CFP®
Senior Partner, Owner
Divergent Planning, LLC
www.divergentplanning.com

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