Wednesday, May 14, 2008

Looking for Cheaper Gas?

Chrysler recently announced an interesting incentive program to spur sales of its new cars. Buy a new Chrysler and lock in cheaper gas prices:
Program participants pay $2.99 per gallon for a maximum number of gallons (which varies depending on model) of unleaded gas or diesel fuel in each of the next 3 years. So no matter what the price at the pump says, you'll never have to pay more than $2.99/gallon.
This looks like a clever way to take advantage of the apparent hysteria of the average American consumer about gas prices. For some reason, gas prices seem to have some talismanic importance beyond their economic impact. Take a minute to think about how much you really spend on gas every year. Say I drive 15,000 miles a year at an average MPG of 25; that translates to 600 gallons per year. Even if gas prices increase by $2 per gallon, we're only talking $1,200. Yes, I'd rather have that $1,200 in my pocket but it's not a catastrophe, is it?

1 comment:

  1. Buying a new car at Chrysler and locking in a low gas price might have been an incentive back in 2008, but if the consumer did that today they might not benefit. The plummeting price of oil is still the biggest energy story in the world. It's bringing back cheap gasoline to the United States while wreaking havoc on oil-producing countries like Russia and Venezuela.

    But why does the price of oil keep falling? Back in June 2014, the price of Brent crude was up around $115 per barrel. As of January 23, 2015, it had fallen by more than half, down to $49 per barrel. The short version of the story goes like this: For much of the past decade, oil prices have been high — bouncing around $100 per barrel since 2010 — because of soaring oil consumption in countries like China and conflicts in key oil nations like Iraq. Oil production in conventional fields couldn't keep up with demand, so prices spiked.

    But beneath the surface, many of those dynamics were rapidly shifting. High prices spurred companies in the US and Canada to start drilling for new, hard-to-extract crude in North Dakota's shale formations and Alberta's oil sands. Then, over the last year, demand for oil in places like Europe, Asia, and the US began tapering off, thanks to weakening economies and new efficiency measures (Plumer).

    In the ultimate long term, oil shale doesn't change most of the big questions surrounding sustainable energy. Prices are still going to rise, except for occasional blips. We still need better sustainable alternatives. Fossil fuels are still wreaking environmental catastrophe, and the fracking process that's necessary to produce oil shale is particularly bad. It would be foolish in the extreme for our civilization to abandon the progress we've made on those fronts and go back to the SUV culture of the 20th Century (Malouff).

    Work Cited:

    Malouff, D. (2014) Gas is suddenly cheaper; the reason is bigger than you think. Retrieved from:

    Plumer, B. (2015) Why oil prices keep falling-and throwing the world into turnmoil. Retrieved from: