I’ve been neglecting Moose for a couple weeks since I’ve been traveling so much. But, I took him out for a spin the other day and was absolutely shocked to see that gas prices have ROCKETED to $4.11, $4.29, and $4.39 for regular, plus, and supreme at my neighborhood Chevron station! I know WTI oil prices have risen to $112, but it really didn’t hit me until I saw and paid for the latest gasoline prices.
As a city dweller, I take the bus to and from work, and try and ride the bus as much as possible on the weekends. The only times I really drive is to and from the tennis club, and up to Tahoe which is about 180 miles away. Overall, I drive about 6,500 miles a year which is not that much compared to the national average of 15,500 miles a year. With Moose getting roughly 17 mpg, I spend around $2,145 a year in gasoline, up from just $1,750 this time last year.
IF I’M SHOCKED, WHY AREN’T YOU SHOCKED TOO?
When gas prices were only $3.50/gallon, my yearly gas bill would be roughly $1,750 for 6,500 miles. $395 more in gas costs isn’t exactly going to break the budget for me, or for most people ($33 more a month), yet I’m pretty shocked nonetheless. I’m so shocked that I’ve decided to asset allocate out of equities and back into cash and selective bonds in my 401K because I’m worried high energy prices, along with problematic state government deficits will ignite another sell-off. I’m happy to lock in 6.8% performance YTD in my mothership fund and play it safe.
In addition, I’m looking to cut an additional $100-$200/month out of my expenses to counteract $4+ gas prices, which only costs $33 more a month. Skip a lunch here, cut down on gym usage there, drink more water are all things I plan on doing. In other words, thanks to oil, I’m looking to slash spending by 3-6X more!
In my world, everything is rational. The reason why gasoline prices are as high as they are is because people are willing to pay for it. If people weren’t willing to pay for it, prices would be lower. I, therefore must be an anomaly to believe that $4.11-$4.39/gallon is a painful level. I’m consciously reducing my gas consumption, even it it only costs me $395-500 a year because I’m mentally revolting at paying so much.
But now, as I think rationally still…. if someone like me, who drives half as much as the average American and has a steady flow of income is clamping down consumption, then it’s logical to assume that other people will also start tightening as well. It’s not like I can’t afford an extra $33/month, it just annoys me that prices have gone up so quickly. I’m mentally going on strike and just going to take the bus everywhere now, even if it does take longer. I figure, why not use this time to reduce my global footprint, reduce traffic, and save some money in the process?
MAYBE THERE’S ANOTHER REASON
There’s one important variable that we should recognize. The job market has come back in force as predicted! People are getting raises and getting jobs again. Why else would traffic be as horrendous as it has been in SF in a long while? There are plenty of positive anecdotes that suggest things are drastically improving in addition to the government labor statistics. Fellow blogger’s online incomes have skyrocketed in March, flight loads are soaring, the markets are at 3 year highs, and head hunters are calling out the wazoo.
Despite it all, I’m still cutting down on energy consumption and re-balancing my portfolio. I’m happy to see the economy and the markets continue to improve, even if I’m not fully invested anymore. Call me conservative, or too easily satisfied. The older I get, the less I really need.
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Updated for 2017 and beyond