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What If Gas Were $10 Per Gallon?

By Frugaling 5 Comments

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Price Of Gas Pump Fuel Tax Car
Photo: flickr/stevesnodgrass

As a car owner, my budget is precariously balanced on the assumption that I’ll only be putting in about $40-50 per month in my tank. Being frugal is often described as an effortful choice, but what if the socio-political climate affected that ability? What if transportation costs became a burden we could no longer balance? What would we have to cut out? How would our lives change?

Yesterday, I attended a thought-provoking debate held by public policy center of my university. The organization tries to inform the general public about policy and health concerns that could occur. With proactive and prevention-based education, they believe that the general public may be able to better handle adverse events.

This week’s question was: What if gas were $10 per gallon?

What could cause gas prices to spike?

There are various events that could influence the price we pay at the pump. While many are prevented on a daily basis, crises could occur that temporarily or permanently spike gasoline. The following are 5 catalysts that quickly come to mind:

  • Increased domestic demand from businesses, industry sector
  • Global market needs for gasoline
  • Speculation from oil traders
  • OPEC and/or the largest oil producers curtail output
  • Terrorism, war, instability, or something unpredictable

While unlikely, these concerns can and do occur. For instance, back in 1973, we had a terrible oil crisis that sent prices up 400% and left budgets decimated. Embargos from oil-producing countries made for historic highs at the pump.

We don’t have to look that far back to see atmospheric increases. In 2011, Hawaii documented record-high gas prices nearing $5 per gallon. Even though it’s a small island, this severely impacted the economy and population.

How much do we currently spend on transportation?

If gas increased to $10 per gallon, we’d be in real trouble. Our economy and transportation systems would be heavily burdened by large fluctuations. Think about how much you drive for fun, errands, work, children, etc.

Spending on transportation is second only to housing expenses. Every year, Americans spend an average $17,000 on housing costs, with $9,000 going to transportation needs. If gas prices tripled to $10 per gallon, we would suddenly be looking for compromises in our budgets. From public transportation to private citizens, everyone would be impacted.

How would life change if this happened?

The threat of gas spikes and/or continued increases really highlights the fragility of our current consumer system. If transportation costs skyrocket, we may see significant modifications in our driving, purchasing, and vacation behaviors. A quick jaunt to the local supermarket would instead be an adventure saved up for and withheld until absolutely necessary.

People would probably opt to bike to work and run errands. Plastic bags would likely disappear, as the energy needs would be too demanding. Heating our homes would be painfully expensive in the winter.

Eventually, we would continue and the economy would recover around this new life. Cities would likely condense and become more urban, with suburb populations flocking to central areas. This would motivate people to seek alternative energy forms and mass-produce electric vehicles. Changes would most certainly occur, but sometimes for the better.

I wonder: If we pretended like it were already $10 a gallon, would we live greener, healthier, and more frugal lives? How do you think you’d change your travel habits if gas went to $10 per gallon?

Filed Under: Save Money Tagged With: car, Frugal, fuel, gas, money, OPEC, price, spike, tax, transportation, vehicle

Why Are College Textbooks So Expensive In The Google Age?

By Frugaling 13 Comments

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College Textbooks price problem
Photo: xshamethestrongx/flickr

We live in the greatest information age ever. Bandwidth, storage, data, smartphones, and computers are cheap! With a carrier contract, you can have your first Android or iOS phone for free. For as little as $200, you can buy your first computer – brand new. These devices used to be expensive and less powerful – a luxury for the wealthy, subject of study in academia, or business tool.

The decline in prices is largely attributable to Moore’s Law, which asserts that the number of transistors on circuits doubles approximately every 2 years. These advances have contributed to the accessible age for information – spanning vast income demographics and socioeconomic factors. Unfortunately, college textbooks haven’t seen these progressive declines that could attract larger audiences.

Information Is Stuck Inside A College Textbook

Major publishers of textbooks (i.e., Pearson, McGraw-Hill, and Reed Elsevier) have long held dominant control of the industry. Despite vast sums of encyclopedic information moving to free sites like Wikipedia, these publishers have courted the strongest academics to publish on their platforms. With this control and profit model come crushing prices for students.

Academics, largely coming from older generations – before the popularization of the Internet – are content with this publication model (or, they must be if they keep hawking them at the beginning of every semester). When they are recruited to write for these publishers, their knowledge is condensed, controlled, and synthesized. Unlike the Internet’s anarchic flow, an elite few choose what is shared.

Most businesses follow free market principles of supply and demand, but the textbook industry doesn’t follow those same rules. Their supply is infinite and their demand is solely based on their marketing tactics to professors, and the network that professors have with authors. In turn, this stifles competition for pricing – making every book unique and “worth” a premium price.

New College Textbooks Are A Small Fortune To Buy, Make

Publishers use rich text, color, paper, and often publish in hardcover. All of these materials are beyond necessary and contradictory to the principles of progress that are present in this information/Google age. The quality materials give even more reason for publishers to charge more for the college textbooks, but oftentimes you won’t ever reference the book again.

If you are unlucky enough to buy a textbook during an edition update cycle, your $200+ purchase price may lead to an abysmal resale value. New editions are constantly released, usually with minor changes that are imperceptible to the casual reader. This forces students to buy newer and newer texts, and professors are encouraged to hawk these latest editions because they are given free instructor copies. Effectively, this artificially manipulates the supply for certain level textbooks.

When new textbooks come to market, they can easily fetch nearly $200 or more. That’s 1000% more than most popular hardcover novels at Amazon.com. While the Internet has made for more free stuff than ever, textbooks seem to be stuck in the three-decimal price range. Technological advances seem to be overlooked when it comes to price considerations.

Google Search Economics Answers
Google, What’s Economics? (Click to enlarge)

Online, Electronic Platforms Were Supposed To Bring Price Declines

Despite the significant, onerous budgetary demands that these expensive college textbooks place on students, professors seem happy to assign them as “required” for the course. Every class I’m taking this semester emphasizes the need for certain textbooks. It seems like professors willingly participate in this complicated price fixing.

While technologies have improved, the prices of textbooks haven’t fallen. Moreover, even though ebooks and online books are becoming more popular, they are usually the same price or a smidgen cheaper than their concrete brethren. Unfortunately, this small price decline (sometimes) does not account for the fact that the digital textbooks cannot be resold. By purchasing an online book, you are limited to that world and restricted from recouping some of your losses.

A Plan Of Action Going Forward

This semester I refuse to buy a single college textbook. It’s not that I believe we should abolish them, but make them more accessible. Even though I won’t purchase one this semester, I use every campus resource I have to get access to them. Thankfully, as part of the Big 10 system, I can request books from every library within the network.

Next time a professor says a college textbook is required for ask, it’s worth asking them:

  1. Did you get a free instructor copy of the text?
  2. Why are you promoting this particular text and edition?
  3. Are there any free methods (i.e., Wikipedia, online editions) to getting access to this information?
  4. Would you buy this textbook if you were taking this class?
  5. Will we actually reference from this throughout the semester?

Filed Under: Save Money Tagged With: Amazon, Books, college, expensive, Google, Information, knowledge, McGraw-Hill, Pearson, price, Reed Elsevier, school, textbook, university, wikipedia

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