Cheap Gas Opportunity Cost

Should people drive out of their way by several miles in order to buy cheaper gas? I recently drove 10 miles to get gas that was 22 cents a gallon cheaper than what was available at any of the five gas stations in the town closest to me. (Which is a 12 mile drive to begin with. I live in the boondocks.) By pump price comparison, I saved $3.05 on the gas I bought. Since I get 22 miles per gallon, I figure I spent $1.65 in gas to get this savings. Was saving a net of $1.40 worth the additional wear and tear on my vehicle? Or worth the extra time it took me to drive somewhere I otherwise had no reason to go?

Here are a couple of ways to calculate it. The Internal Revenue Service allows self-employed persons to deduct mileage costs. So let’s suppose I went to that gas station on business. How much could I have deducted? In late November, 2007, the IRS issued the 2008 standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. These figures include insurance, maintenance, and depreciation, operating costs that many of us do not consider when driving a little out of our way to obtain a bargain:

• 50.5 cents per mile for business miles driven;
• 19 cents per mile driven for medical or moving purposes; and
• 14 cents per mile driven in service of charitable organizations.

(In a moment of irony, considering how medical costs keep going up, the IRS actually dropped the rate for medical miles from last year. But let’s just talk business miles. ) At some point later this year, the IRS might be pressured to raise this number as not realistically reflecting rising gas prices. It has happened before, so it might happen again. Meanwhile, take 50.5 cents per mile as a plausible figure for the cost of running my car. Multiply it by the 10 extra miles I drove, and the cost to my car was $5.05, not the $1.65 in straight gasoline cost I came up with above. And it far exceeds the dollar savings at the pump. In fact, by driving 10 miles out of my way to obtain cheaper gasoline, I just lost $3.65. Ouch.

The second part of the calculation is how much time I lost by stretching out this mundane errand, time out of my life that can never be regained. Let’s say it took me a half an hour, including time spent pumping the gas as well as driving to and from the gas station. I won’t include the time I wasted going inside and looking for a newspaper, which I gave up on when I saw a line at the cash register. And I was lucky, because I only had to wait behind one car before pulling up to a pump.

What is my time worth? There are a lot of ways to calculate this one. But let’s suppose that instead of being a writer who sometimes barely clears a profit each year, I am a person who is employed. And then let’s further suppose that if I hadn’t spent a half an hour getting gasoline, I would have had the opportunity to be paid for an additional half an hour at my job. A big local employer is Wal-Mart, which claims to pay $10.40 per hour on average. Part-time employees don’t get that much, but the $10.40 figure is easily halved to show that if I could have worked an extra half hour, I could have earned an additional $5.20. Far more than the imagined gas savings of $1.40, and also more than the cost of wear and tear on my car.

To be fair, to figure my true half hour earnings, I’d also have to subtract the commuting cost of getting to my Wal-Mart job, which in my case would be 34 miles round trip, and prorate it against the number of hours I worked that day. But to keep the calculation simple, I’ll just consider the gross cost of working. Using the IRS figures, it costs me $17.17 merely to show up at Wal-Mart to work, or $85.85 per five-day work week, or $171 per two weeks, which if I drove nowhere else would be the time between fills at the gas station, or 340 miles. Do I want to add another $5.05, the cost of getting the supposedly cheaper gas, to my commuting cost? No, but it’s not much by comparison to the commuting cost itself. And that is why Americans will continue to drive to work, because there aren’t many alternatives and even Wal-Mart wages will cover the outlay for the gas. Still, paying more for supposedly cheaper gas makes no sense.

Now let’s say that I earn roughly $50 per hour or $104,000 per year. Lots of families and individuals earn that much. It still costs me the same to get the gas. But compared to a gross weekly income of $2,000, the difference in the gas price is too small a percentage to be worth calculating. What the well-paid individual needs to consider is how to avoid wasting time seeking a phantom bargain. But then, so does the poorly paid person, since my calculations above clearly show that driving 10 miles to save 22 cents per gallon on gas does not save any money at all.

Clear as mud?

There’s one other angle to consider. The reason I drove the extra 10 miles today was not just to test this theory. It was also because I really could not face the newest high numbers at the local gas stations. I needed to feel that I had outsmarted the international oil machine. But all I did was spend my money differently by putting more miles on my car and denying myself a half-hour of working time. Time out of my life. Think about your time, not just the money, when you consider what a bargain costs.