The Cost of Driving is Up, and It's Worse Than You Think
As pain at the pumps intensifies, the 2011 AAA driving survey reports that the average cost of driving a mid-sized sedan 15,000 miles a year has gone up 3.4 percent from 2010. But the actual bottom line is much worse than that, because AAA based its calculations on really low fuel prices. I don't know about you, but I haven't seen any gas for less than $3 a gallon lately.
With $4 a gallon the norm in much of the country, the $2.88 used to make the calculations seems almost quaint. AAA says that's a late 2010 figure, from its own Fuel Gauge Report.
Expensive gas... and tires
Two main factors sent bottom-line expenses up, AAA said: tires, oddly enough (carmakers are using more expensive grades on new vehicles) and, as expected, gas -- up 8.6 percent in the survey. Driving a car these days means your wallet is taking a shellacking at 58.5 cents per mile, or $8,776 over the year.
It would be easy to say that skyrocketing cost of ownership will get people into smaller cars, and that's true as far as it goes -- the survey shows that such pocket vehicles as the Ford Focus, Honda Civic and Toyota Corolla are depreciating less than larger alternatives.
And expensive gas is also creating demand for the electric vehicles that are in short supply, causing some price gouging. EVs entice buyers with estimates of two to five cents per mile operating costs. Car sharing services also wave high ownership costs as a way to get consumers to give up their automobiles entirely -- and hire them only when needed.
Whipsaw oil price cycles
It's likely that the experience of past fuel crises will be repeated, and people will whipsaw back and forth between the large cars they actually like better and the smaller ones they feel forced into. That behavior actually causes fuel prices to fluctuate wildly.
The road to peak oil isn't a smooth curve, but a jagged landscape reflecting consumer anxiety. At a Toyota event on Tuesday, I interviewed Peter Wells, a former Shell and BP executive who advises the automaker on fuel issues. He said that consumers hit with high fuel costs drive less, which depresses oil demand and thus causes prices to drop. And once they do fall, people start driving again, and buy more SUVs -- so demand is up again and so are prices. Expect that cycle to repeat, but with prices rising higher and falling less, in the coming years.
Americans may love their SUVs, but the gas guzzlers don't love them back. A typical four-wheel drive sport utility vehicle costs a whopping $11,239 to drive 15,000 miles, at a cost of 74.9 cents per mile, AAA said. They've always been more expensive to own, but people are willing to pay a premium -- at least until $4 gas results in $200 to $300 tank fill-ups. Then the Expedition gets a "For Sale" sign.
Some minor good news
The modest good news in AAA's survey was that some costs actually fell: maintenance was down 2.2 percent, and insurance 6.1 percent. But propelled by those out-of-control fuel prices, overall costs are up, and likely to go much higher when adjusted for today's fuel prices. AAA started its survey in 1950, by the way, when driving cost nine cents per mile. And gas? That was 27 cents a gallon. Adjust for inflation all you want, but gas was still very cheap back then.
Related:
- Price Gouging is Rampant on the Chevy Volt and Nissan Leaf
- What Does Your Car Cost? A Lot More than You Think