Gas Price Still Doing Okay

So far so good ... national average gasoline prices are still under $3.00. Let's hope that horizontal trend we have been seeing lately in the price stays nice and flat and doesn't start going up with the idea of crossing three dollars per gallon.

National Fuel Gauge Reading Full

The Energy Information Administration keeps track of the total amount of gasoline in storage in the United States. This information is of interest because historically when the amount is low, the price of gasoline rises. This can happen regardless of the price of oil, the bottom of the pyramid in the gasoline production chain. Short term gas prices are set by the relation between demand for gasoline and the supply available. The EIA publishes a report called the Weekly Petroleum Status Report where you can always find the latest updated information.

In the graph, taken from the current Weekly Petroleum Status Report you can see how in September 2008 the amount of gasoline was well below the gray average band. We also had record fuel prices in that time. Right now the national gasoline supply is above average. Good news for drivers! Keeping an eye on this graph is like keeping an eye on the nation's fuel gauge. When it starts dropping below the average range, watch out for high gas prices!

Diesel Energy Tax Credit

Under the right circumstances, the IRS can help you save on gas. The Feds have been offering tax incentives to increase fuel economy. One of the incentive programs is the Advanced Lean Burn Technology Vehicles credit. Here you will find a list of qualifying vehicles. So far they are all diesels from model year 2009. So if you have been considering buying a diesel car this could be you chance to do so and get a tax credit at the same time.

The IRS will only give out the money if you are the original buyer of the vehicle, so no buying used. Also the vehicle must be for your personal use and not for resale. The amount of the credit depends on the model you choose. Also the credit amount decreases as the automaker sells more and more of the vehicle. It drops to zero after the sale of 60,000 vehicles. So if you want a larger tax credit, it helps to buy sooner rather than later.

Why the "Lean Burn" in the tax credit title? It means that the engine operates with more air in the cylinder than is necessary to burn all the gas. There is extra air. This allows for higher compression ratios and lower airflow friction losses (or pumping loss) but produces NO_x pollutants. However, modern catalytic converter systems are capable of treating these. Perhaps in the next post we will talk about lean burn technology for saving on gas.

Peak Oil Means the End of Production Growth

Back in the 150th anniversary of oil drilling and peak whiskey posts we talked about the problem of Peak Oil. The problem is that we are going to run out of growth in supply not that we will run out of oil. The graph above shows that ever since about 2005 the total oil output of the world has stayed more or less constant. It is a flatline with some fluctuations above and below. This flatline happened even though the price skyrocketed to almost $150. There are a lot of reasons to think this limit to production is geological and cannot be removed.

There is going to be absolutely no flatline in demand. The global population is still growing. The population of the United States is growing. The billions of people living in Brazil, India and China are experiencing rising standards of living and will want the vehicles that come with it. What happens when the supply stops growing and the demand grows and grows? Prices rise. A lot. Looking at the graph of global oil production lets us understand why.

The solution is that we have to find ways to save on gas. The focus for the future must be on reducing gallons used per hundred miles driven. If that means we have to settle for smaller less powerful vehicles, so be it. Those are all we will be able to afford anyway. Detroit should make gas mileage a top priority to stay alive and relevant in the decades ahead.

Gas Guzzler Tax

Cars in the US that do not get at least 22.5 miles per gallon have to pay a Gas Guzzler Tax. This tax is the Fed's way of incentivizing the automakers to improve fuel economy. The tax was established in the Energy Tax Act in 1978. It only effects cars. SUVs, pickup trucks and minivans are exempt. You do not have to pay this tax. The automaker (or importer, in the case of foreign vehicles) normally pays the IRS directly. The fuel economy sticker on the window of new vehicles will show the amount of the tax, in case you are interested. The image included with this post demonstrates the Gas Guzzler Tax in the sticker. It is the number located in the lower left.

Cash for Clunkers Ford's Hero

General Motors has received a lot of scorn for converting itself into "Government Motors" but we must remember that Ford has also needed Federal help to stay afloat. Whatever you think of the Cash for Clunkers program, the beancounters at Ford like it. This is the quote that says it all (from the article in the link):

We were having a good month — and Ford's been having some good months lately — but the (clunkers) program really put us over the top for sure.

The bottom line is that the US auto industry is suffering all around. Without the Feds stepping in to save the day, all Detroit would be underwater. If you ask why, I will tell you that one of the biggest mistakes Detroit made was ignoring fuel economy. The oil price spike was big news, but over the last years we have seen consistently high gasoline prices. It looks like this will be a constant problem in the future. The price of oil is still historically high and could easily go higher. Detroit has to wake up and start making cars that sip gas at a rate that people can afford to pay.

Is Premium Gas Worth Premium Price?

Here is another analysis from MoneyTalksNews on the issue of using a high octane gasoline and paying extra for it. Here at Save on Gas we think the take home message is found at the 44 second mark in the video "Using a higher octane gasoline than your owner's manual recommends offers absolutely no benefit". Watch and see for yourself!

Prepaid Gas Cards

Sometimes the way you pay can help save on gas. Discounted prepaid gas cards can sometimes get you a 10% savings. These cards are similar to debit cards, but are only good for the purchase of gas. You get one with a preset starting balance. The trick is that gas companies will offer incentives for buying these. Maybe you can get a balance of $55 paying only $50. That 10% savings doesn't look like much on each card, but 10% is 10% and over a year it adds up. Another advantage is that is helps you budget your gas use. If you give yourself one card, you know when it is gone. But if you pay for your gas out of your pocket, it can be difficult to notice where it all goes to.

This guy thinks prepaid cards are a good idea too.