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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?

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

Comments

  1. Jen @Sprout Wealth says

    April 10, 2014 at 3:50 am

    It isn’t even $10 per gallon but already I am living like it already is. So long as I can walk the distance (sometimes it can be really far but as long as it isn’t hot or I am not carrying anything heavy), I walk it. I used to ride a lot and spend a lot of money on transportation not too long ago but since I decided to be wiser with money spending, I saved a significant amount of money because fare goes up each time gas goes up. I think I’ll save more if gas would go as much as $10/gal.

    Reply
  2. Dave @ The New York Budget says

    April 10, 2014 at 6:48 am

    That’s the biggest competitive advantage in NYC and the reason I am able to write a blog. Sure, our rents are high, but that is pretty much offset by our lack of cars!

    Reply
  3. Syed @ The Broke Professional says

    April 12, 2014 at 3:11 pm

    Very interesting question. If you already have a pretty solid budget it would just be a matter of cutting back on certain things to make up for the increase in gas. But I think there would probably be a more emotional aspect to the problem, perpetuated by every 24 hour news cycle talking about it.

    Reply
  4. earthmen says

    May 25, 2014 at 12:38 pm

    The Europeans have been living with $10/gallon for many years.

    Reply
    • Sam Lustgarten says

      May 25, 2014 at 4:43 pm

      Right you are, Earthmen!

      Reply

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