How Much Will the Projected “Big Gas Price Increase” Really Cost You This Summer?

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The media is projecting “pain at the pump” due to increased costs of gasoline. Here’s what they predict. The actual “take-home pay drain” might be surprising.

Scary headlines push up page views (and some might say agendas). With gasoline prices having been about the historical norm for the past few years when adjusted for inflation, an uptick this summer has many news outlets predicting dire consequences.  Here are a few headlines we chose from sources many people trust for news:

Fortune: Gas Prices Could Make This The Most Expensive Summer For Driving In 4 Years (April 30, 2018)

CNN Money: Higher Gas Prices Could Spoil Trump’s Tax Cuts (May 9, 2018)

New York Post: Get Ready For The Summer Of Gas Price Hell (April 30, 2018)

CNN Money actually took the time to nail down a numerical increase rather than blather on about the doom and gloom of a summer spoiled by gasoline prices. The publication’s headline from April 10th was “You’ll Pay 14% More For Gas This Summer, Forecast Says.” We will take CNN’s word for it and calculate how much more you’ll pay for gas this summer using America’s top-selling vehicles as examples. For perspective, we will then compare the cost of gasoline to the total cost of ownership of those vehicles. Throughout the exercise, we are going to endeavor to be fair, but always lean the way of “bigger increases” when we need to make a judgment call on some facts or projections.

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Ground Rules – What Is Summer, What Does Gas Cost? How Will We Arrive At a Total Increase?

Let’s not make this overly complicated. Summer starts June 21st and ends on September 21st. Let’s call our “summer” a duration of 3 months. That is a nice easy number to work with since it is 1/4 of a full year.

With regard to “how much does gas cost” let’s also keep this simple. The EPA has committed public servants slaving away calculating the average costs for fuel based on today’s prices. Rather than replicate their work, we will just show you what they already figured out to be the average annual cost for some popular vehicles. They base their average annual fuel costs (shown above with red arrows) on 45% highway, 55% city driving, and a substantial 15,000 annual miles.

To get our total increase in costs for the summer, we will simply figure out how much a 14% increase over the summer would be in terms of dollars. To eliminate any ringers, we have selected the top-selling affordable vehicles in four vehicle classes. If yours is not on the list, one like it probably is, but feel free to go to fueleconomy.gov to calculate your exact numbers.

How Much More You Will Pay This Summer For Gas Due To The Projected Increase

Toyota Prius Prime

The Prius Prime plug-in hybrid electric vehicle (PHEV) is the top-selling affordable electric vehicle of any type in America. It has outsold the Chevy Volt and Chevy Bolt by a wide margin year to date and since the introduction of the luxury Tesla Model 3 last July (starting at $46,000, but typically selling in the mid $50Ks), it has outsold that media darling as well. The Prius Prime cheats in this example because it can use electricity as well as gasoline. Let’s calculate a 14% increase anyway, just for grins and giggles. We’ll show the math in this example, and skip it for the next three.

Annual Cost Using Today’s Average Fuel Prices = $650    1/4 of a year = $162.50   14% of $162.50 = $22.75. Since most people fill up weekly, that equates to about $1.89 per week more for a Prius Owner.

Toyota Camry (4 cylinders)

The Toyota Camry is beating the pants off the competition. Its sales have been growing and are up year to date, while its peers, like the Honda Accord, are seeing double-digit declines. Despite being a sedan, the Camry is still one of the top-selling vehicles in America and the 4-cylinder makes up more than 90% of those Camry sales. The rest are split among the hybrid and V6 trims. A Camry owner will pay $43.75 more this summer for fuel if prices increase 14%. A Camry owner would thus see about a $3.64 higher cost per fill-up.

Nissan Rogue AWD

The Nissan Rogue is the top-selling vehicle in the largest vehicle segment in America. The all-wheel-drive Rogue owner will see an increase of $56 in total added fuel costs if CNN’s dire predictions come true. Therefore, each fill-up will cost the Rogue owner about $4.67 more. The Rogue example is neat because it just so happens to have the average fuel economy for all vehicles in America (27 MPG Combined).

Ford F-150 4WD with 3.5-Liter EcoBoost V6 Turbo Engine

There are so many types and trims of Ford F-150s it is almost a cottage industry just keeping them straight for media coverage. The F-150 is the top-selling individual nameplate in the U.S. market. A sizable chunk of them are used by business owners, large and small. Since we selected the up-powered and 4×4 version of the F-150, we feel it represents a sort of “worst-case” scenario for the typical F-150 owner. The truck in our comparison will cost its owner $78.75 more to fuel over the course of the entire summer. Or roughly $6.56 more per fill-up. Now, if the truck owner is using that truck in her business, she won’t actually incur the same sort of direct cost that the other three example vehicle owners might since the cost to fuel the vehicle would be deductible from earnings. So, the costs we show would be for a private owner not deducting vehicle expenses.

Fuel Cost Increases – Percent Of Vehicle Ownership Costs

Draw your own conclusions about whether an average increased cost of $56 for a full summer’s worth of fuel is cause for panic and distress. However, before you do that, let’s get some perspective. AAA calculates the annual cost of ownership of various types of vehicles. Let’s list out the increase due to the higher fuel costs predicted by the media for the summer as a percent of the cost to own the vehicle over the summer. Here we go:

Prius Prime – 0.3% Added cost of ownership due to 14% fuel cost jump this summer.

Toyota Camry – 0.5% Added cost of ownership due to 14% fuel cost jump this summer.

Nissan Rogue – 0.75% Added cost of ownership due to 14% fuel cost jump this summer.

Ford F-150 – 0.8% Added cost of ownership due to 14% fuel cost jump this summer.

Conclusion

CNN’s story about the 14% increased cost of gasoline is based on government projections that regular unleaded could average $2.74 this summer. That may sound high, but when adjusted for inflation, gasoline prices were within about 50-cents of that price throughout most of the past century. Gas prices do see peaks and valleys. The inflation-adjusted cost of gasoline in 1934 was $2.67. In 1947 it was $1.97. In 1980 it was $2.95. In 1988 it was $1.59. In 2012 it was $3.80. Hang in there, and keep variable costs like the cost for energy in perspective. They come down as well as go up. The downward trends are not so loudly trumpeted by the media. Do you remember any headlines last year saying “Get Ready For A Summer Of Gas Price Heaven?”

Source Notes:

Top of page graph of inflation-adjusted gas prices.        Botton of page price graph of gas prices. 

 

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John Goreham

John Goreham