Motor Fuel Costs

A few days ago, I was able to buy gasoline for the Chev at the rate of $2.99/gallon. How nice. Filling the truck costs $65 at that rate, instead of the $80-plus that I've been used to. With all the commuting I've done this year, it feels as though we've spent most of our income on motor fuel. To see if that was true, I ran some numbers. As you can see from the graph (above), we spent around $4200 on petrol in 2013. I'm not going to go into detail about our monthly income and benefits, but let's just say that $4200 comes out pretty close to 10% of our take-home pay. Wow. It seems like a lot of the cash that comes in the door goes straight into the fuel tank. On the other hand, when I researched this topic before, I found that the AAA holds that the costs of car ownership are second only to the costs of housing for most families, so maybe it shouldn't be such a surprise.

What did surprise me about my data, though, is that our 2011 and 2012 costs were around $3900 for both years—only about $300 less than 2013—even though I wasn't commuting in 2011 or 2012. What can explain that? Well, there are probably three factors right? 1. Vehicle fuel efficiency; 2. Miles driven; 3. Price of motor fuel. We did switch vehicles between 2012 and 2013, swapping the defunct Sable for the Saturn. The Saturn is slightly less efficient than the Sable was, so we've used more gallons of fuel for every mile driven in 2013. But, again, with the amount of commuting I've done, this should argue for a significantly higher gasoline bill in 2013 . . . which we really didn't have. So, if our petrol costs are not being driven (no pun intended) by fuel efficiency or miles behind the wheel, what is left? Yep. The price at the pump.

Indeed, when I do a simple regression using the standard international benchmark (Brent) for crude oil prices against our gasoline spending, I get a good correlation, with an "r" value of 77. When I drop 2010 from the regression because it is an outlier (we drove to Montana in the Chev at least two times), the correlation is even stronger: my "r" is 86. Granted, I have only a few data points, and I've not taken the time to generate any measures of variance, but I feel pretty comfortable with the explanation. (If you want to double check my regression, I'll send you the data.)

Even more interesting (at least to me) than the foregoing is that, by the local benchmark crude, West Texas Intermediate (WTI), gasoline should have been cheaper in 2011, 2012, and 2013 than it is. For the first time in history, these two benchmark prices for crude oil have deviated, with Brent being significantly higher than WTI for the past few years. (You can look at the data here.) This is because, as The Economist points out, the United States is producing a significant amount of domestic crude that has been stock-piled in Cushing, Oklahoma. There are bottle-necks in domestic transport and refining capacity that have created a glut of unrefined crude. The glut pushes down the price of crude, but the refining and transport bottle-necks keep the price of gasoline high.