Monday, June 09, 2008

Gas Prices Matter? Maybe so...

Over on Consumerist, there's a discussion where people are incredulous as to why a guy on eBay purchased a $50 Target gift card for $55.71. While on the surface it seems ridiculous, there may actually be a legit reason for it (and a whole host of illegitimate reasons). Consider:

Ipinok needs a gift card from Target but he is 25 miles away from the closest Target store. Ipinok drives a Suburban and it will cost him 4 gallons of gas for the round trip + time to go to Target to get that $50 gift card. 4 gallons of gas will cost him at least $16 dollars this day. So,

$50 gift card + $16 gas = ($66 + time involved) > $55.71 bid price

Therefore, paying $55.71 with free shipping is well worth it, plus no need to spend the time going to Target and wait in line.

It used to be, you really didn't have to factor in gas prices when driving around purchasing an item (unless you drove around ALL DAY). Now, it can be CHEAPER to over-pay, and not spend the gas money. It also completely destroys the age-old adage of driving all over town to save $.04 on a gallon of gas. The cost savings is no longer cheaper then the gas being used.

A little practicale eco-thought for the day. I'd be interested in hearing your stories on how gas prices have changed (or will change) your behavior.


JTapp said...

I guess the calculation assumes he won't be shopping at the Target with the gift card? Because otherwise, he'll still be spending that $16 on gas. Guess he'll give it to someone?

There are some decent websites where you put in how much mpg your car gets, how far away the gas station is, and what the price of gas at that station is to tell you if it's worth it or not to go there. Here's what I did yesterday:

Prices started hiking on Friday and I feel like they'll spike again tomorrow, so I drove 8.5 miles out of the way to get gas at $3.75. (It's $3.78 at the station but you get a 3 cent per gallon discount if you pay cash.) Our neighborhood station (Shell) was charging $3.89, which seemed to be pretty common price and was up 3 cents on Friday.

1/2 the route was city (24 mpg) and 1/2 was highway (33 mpg). So, I figure I got 28.5 mpg driving to the station, meaning I used up about .3 gallons to get there and .3 to get back (17 miles total).

.6 gallons * $3.75 = $2.25 to drive the 17 miles to get gas.

Had I gone to the Shell (which I guess is probably .33 city mile from our house) it would have cost me:
.03 * $3.89 = $.12 to get gas.

I put $42 of gas in the car (pre-pay cash).

$42 / $3.75 = 11.2 gallons. So, altogether I spent $42 + $2.25 = 44.25.

Had I bought equivalent gallons of gas at the neighborhood Shell:
$3.89 * 11.2 = $43.57 + .12 driving = $43.65.

I guess I did that right, wow, I screwed myself by going for 13 cent cheaper gas!

I had to go to the grocery along the way, so some of the mileage wasn't purely just to get gas, so that should make me come out slightly ahead.

Moral of the story: Do the math beforehand. And never drive anywhere JUST to get gas, but only do so if you're running another errand.

Note: my MPG should be accurate b/c I was running without the A/C and no radio. If you run the A/C, you can just about halve your car's MPG.

Greatmoose said...

Good point about spending the card. I guess I assumed he was going to "gift" it, because why else get a target gift card?

Wow, on your gas example. I knew it would be bad, but I didn't think you'd come out BEHIND on a 13 cent price adavantage. Geez.

Joshua "Doc" Wible said...

I guess he could use the gift card online, then have the item shipped to himself, thus use no gas at all. Does take their own gift cards? Who knows.

I dont really worry about gas, I mean I drive a company car, and the company pays for the gas, so...

Now in the 4Runner its a different story. We put mid-grade gas in it, it would probably like premium, but too bad (stupid super charger), so that means at least $.10 more per gallon. But when it comes down to it, you put 14-16 gallons in to fill up, youre talking an extra $1.60, and when it costs $60 to fill up, whats another $1.60. That being said, I dont really try to find a station with $.03 lower price, if there are two across the street from another, then sure, I will go with the lower price, but over all, youre not saving that much $$$.