Locking-In Low Gas Prices vs. Locking-In High Fuel Efficiency

Lately, there’s a buzz over programs to "lock in your gas prices" (Chrysler, MyGallons, etc) But are the program focusing on the price-per-gallon designed to treat the symptom instead of the problem?

These charts illustrate the total cost at gas prices from $2 to $7, if you drive 12,000 miles per year. The green line is a vehicle that gets 30 MPG and the red line is a vehicle that gets 15 MPG. The orange line is also a 15 MPG vehicle, but with a plan that (temporarily) locks the price at $3 / gallon.

Even with the $3 plan, another big gas spike is necessary to save more than a vehicle that gets 30 MPG. The point where the green intersects the orange is $6 per gallon. If the program lasts three years, in order to save the maximum, you need the price of gas to do three things:

• rise above $6 / gallon as soon as possible
• stay above $6 / gallon as long as possible
• hope gas falls BIG TIME after three years!!!
  (when the orange line becomes the red line)

Also, the savings dynamic changes if a $3 plan is used in lieu of cash rebates. In this chart, two more orange lines show what happens if a $3 plan takes the place of rebates that would be worth $1,000 or $2,000 per year.

In summary, if at all possible, the most effective way to "lock in gas prices" appears to be ignoring the cost per gallon and focusing on fuel efficiency.

If you can combine the higher fuel-efficiency with a lower price-per-gallon, you’d have the best of both worlds, but fuel efficiency is the biggest variable.

FYI, Early Discussions of MyGallons.com

Fatwallet.com, "MyGallons.com - Prepay for future gas but not much information"

SlickDeals.net, "MyGallons - Prepay for gas to lock in current prices"

Jalopnik.com, "MyGallons Introduces Service To Let You Lock-In Gas Prices At $4 A Gallon"

Consumerist.com, "tag: MyGallons"

• Recent Posts

• • Report: 1 in 5 Car Dealerships Will Close Soon?
  • Time To Run The Numbers On Car Buying, For Real
  • Waste Less Food With A “Nearly Expired” Container
  • Redesign and Refocus
  • Ramblings on Information Efficiency (Why We Need a “Google” For Everything)
  • I Love Contrarian Comments, Two Recent Readers Share Theirs
  • The Warren Buffet Paradox, Part 1 (The Bailout)
  • Preview: The “Save Money on Heating Costs” Worksheet
  • Buy when there is blood in the streets…
  • I Apologize

• Disclaimer

• Information shared on this site does NOT constitute professional financial advice.