Why You Should Pretend Gas Is Still $4 Per Gallon

Michigan has some of the higher gas prices in the country, and the area where I live generally has some of the higher prices in the Metro Detroit area, so when I’m seeing prices around $2.69, I know that gas has gotten cheap.  I’m sure you’ve seen it too, right?  Good.

It’s interesting, though, because gas has been under $3 here for barely a month, and already people act like they’ve forgotten everything that came along with higher gas prices….that will return, probably sooner rather than later.  Consider:

  • Gas Guzzler Sales On The Rise – With gas prices having been on the decline for a few months, auto companies are reporting that bigger cars, trucks and SUVs are seeing increased sales.
  • Return of Poor Driving Habits – I’ve read various articles about the lower prices, and inevitably there are social media comments along the lines of “I love the lower gas prices.  Now I can drive faster again!”
  • Call for Increased Speed Limits – This one boggled my mind.  Someone in the Michigan legislature is working on a bill that will allow the maximum speed limit in the state to be raised from 70 MPH to 80 MPH.

Gas Prices Will Not Remain Low Forever

mb-2014-12gaspumpPeople love the idea of lower gas prices.  I’ll be honest, seeing the prices slip below $3 was something I’d completely forgotten about.  The $3 limit was a threshold that I figured might never be breached again, not when the average yearly prices had been steadily rising for the last few years.

Now that oil is at comparatively low prices and output is higher, people seem to think that this will be the new norm.

I have news for you: It won’t.

At a certain point, everybody that gets hurt from low prices will start to realize that they don’t like it.  Oil companies will make less profits.  Oil producing countries will see less tax and other revenue.  Gas station owners will continue to see margins erode.

Guess what happens when profits shrink?  All those affected start to work on raising them back up.

Right now, political interests are allowing for oil prices to stay low which is feeding the whole thing, but as soon as those political interests start losing steam, then profits will take center stage.  And, since money and profit are pretty important drivers in the grand scheme of thing, believe me when I say that profit will take precedence.

Charge Yourself Higher Gas Prices

When gas prices start climbing, you’ll want to be prepared.  The best way to accomplish this is to charge yourself the same price for gas that you used to pay.  If you buy 20 gallons per week, and the current price is $2.65, that works out to $53 spent on gas.  Back when prices were $3.50, that would have cost you $70.   That’s a savings of $17!  Pretty cool, right?

The idea behind charging yourself more is that you take the $17 and apply it to something that won’t hurt you once that money returns to paying for gas once the price goes back up.  What are some of the things you can do with it?  I’m glad you asked!

  • Apply it toward debt – If you’ve got credit card debt or other debt, apply the extra money to that amount.
  • Save up for something – If you’re debt free, then save the money up.  You can save toward an emergency fund, or a travel fund, or something else where savings will come in handy, but that won’t negatively impact you once the savings opportunity goes away.
  • Give – You can give the extra money to your favorite charitable organization.  I’m sure they would appreciate the extra funds for awhile.

Things To Avoid Doing When Gas Prices Are Low

You can tell that I firmly believe that the lower gas prices are temporary.  I could very well be wrong on that, but I’m going to be safe and just stick with my assumption.  If you believe the same thing, here are some things you most certainly want to avoid while gas prices are low:

  • Buying a bigger car – There are people now who are car shopping, and figuring out their gas usage based on current prices.  This works out OK as long as prices are up, but if they use a lot of gas and suddenly the price goes back up $1 per gallon, they’re going to be in trouble.  Any car you by should include gas costs as if they were back where they were before the decline.
  • Buying or upgrading something else – If you are saving the $17 per week I hypothetically laid out above, you could save around $70 per month with lower gas prices.  Some people will figure that gives them extra spending money and they’ll start doing just that, spending the money.  Except what happens when that $70 needs to go back into the gas pump?
  • Taking on a new monthly payment – Even worse than just spending the money is applying that towards a new monthly payment, one that will likely still be there when gas prices go up, at which point you’re really going to be hurting.
  • Changing your driving habits – When gas prices go up, I guarantee that these two things will happen: People will complain and you’ll start seeing people talk about changing driving habits to get better mileage.  You’ll see tips on driving slower, not accelerating so fast, and all the others that come with it.  My point is that you should do these things no matter what!  Changing habits back and forth just because of the price at the pump doesn’t really make sense and it never leads to long term positive changes anyways, so just do yourself a favor and drive efficiently regardless of the price of gas.

Readers, what are you paying for gas compared to a year ago?  What are you doing with the savings at the pump?  Do you think the prices will last or are they just a short term thing? When do you predict gas will go back up to $3 per gallon on average?

17 thoughts on “Why You Should Pretend Gas Is Still $4 Per Gallon”

  1. I am a debt-free person and enjoying this state. After I experienced what it feels like, I promise myself that I would never be in that situation again. So, I get to save as much as possible to my emergency fund and am able to give donations to others especially this season.

  2. I am a debt-free person and enjoying this state. After I experienced what it felt like, I promised myself that I would never be in that situation again. So, I get to save as much as possible to my emergency fund and am able to give donations to others especially this season. It’s good that compare gas to saving. Nice strategy.

  3. Funny, how quickly people change their habits. I view the lower gas prices as a sale with a limited time frame. It will increase again and perhaps very quickly. Oversupply is depressing the price and it will not remain low much longer.

  4. For the life of me, I have never understood the “mind-set” of lower gas prices. If you buy 20 gallons a week and it goes down $1 a gallon …that’s $20 a week. Listening to news broadcasts the thought is this “windfall” is gonna save the Holiday buying season…I don’t get it. My thought is prices will come back up …. with a vengeance. Now might just be the time to buy a nice used Prius as prices have come down due to the reduced fuel costs…

  5. I totally agree with you! I have not changed my driving habits even one iota! Plus, I mean, really the lower savings are only netting me about $15/week… which I guess is significant to some people who have trouble making ends meet to begin with. Otherwise, I am going to appreciate it while it lasts and keep my eye on the long-game, which will undoubtedly be higher gas prices!

    • True, though the $15 per week would amount to $780 over the course of the year, if these prices were to hold. My point being, that would amount to an extra mortgage payment or a few extra student loan payments for many, so why not apply it toward something like that versus just spending extra which is what many likely do.

  6. Yikes, do people really go out and buy a new car just because the gas prices are lower? I haven’t really noticed such a windfall but I suppose people who drive to work every day and fill up more frequently would see it sooner than me.

  7. I totally agree, people shouldn’t assume that this will go on forever. It’s far too easy to slip into bad financial habits, assuming that these prices will stay low. Then, after people increase spending in other areas – or worse, buy a gas guzzler – they get upset that prices went back up. At this point, whatever extra money is saved due to these currently lower prices should be applied to debt or savings.

  8. I must say, budgeting in higher gas prices and saving the difference has been pretty nice. Every dollar saved brings me that much closer to my financial goals!

    I also won’t be surprised by the inevitable rise in prices, as I’ve already budgeted for them.

  9. I heard a report on the radio about auto makers thinking consumes are going to start buying more gas guzzlers and electric and hybrids are going to slow down. I bet lower gas prices won’t last 6 months, but sadly lots of people live in the moment. I like the idea of thinking of lower gas prices as a sale. Nice if you can get it, but don’t always count on a lower price.

  10. Here in Europe prices are still almost double, but we also have smaller gas prices as well. Really love the idea of still acting as if they were up and use the money for savings or paying of debt. Sure, getting a bigger car, is clearly not a good idea, but here we don’t like to drive cars that are big ‘resource hogs’.

    • Yes, Europe has definitely embraced smaller cars. Here we have some but they honestly look unsafe compared to the average car. If smaller cars are to catch on, I think the shift will have to be gradual

Comments are closed.