Gasoline and Dollar Cost Averaging

by DanB

Gas prices are jumping up and down regularly. If you drive a large car the cost can be significant between fill ups. Now I am not one to argue about the cost of gas. The stock of the Oil & Gas Company I used to work for has finally reached a price that makes it attractive to sell.

My van burns through the gas quickly. So to manage the ever changing price of gasoline I have started practicing dollar cost averaging when I purchase my gasoline. Most of us have heard of the Dollar Cost Averaging in the Stock Market. Basically you invest a set amount each month in the market. The prices fluctuate but over time your investments even out. Dollar cost averaging is attractive because it takes little work to implement. In fact it can be automated most of the time.

You can apply this same technique to purchasing your gasoline. In my case I chose ten gallons of gasoline as my averaging amount. So when I stop by the gas station I put ten gallons in. By not filling the tank I am poised to save if the price dips. Should the price go up I am not out as much as I would be if I filled the tank.

When the price gets low – say under $2.00/gallon here – I go ahead and put more gas in. Usually fifteen to twenty gallons.

This is all relative. I drive a large vehicle that gets low gas mileage. But if you divide the number of people transported by the cost per mile my travel is actually more efficient than many people with their high gas mileage small cars who travel alone.

To try this with your gas purchases simply determine how much gasoline will fill half of your tank. That is the number I use for my averaging. Give this a try and know that you are averaging paying less in general than you would if you filled your tank at every fill.

  • JerryB

    Sounds like a good idea.

    It’s been a while since I had an economics class, but doesn’t the theory of dollar cost averaging have to do with spending (investing) a set dollar amount each period, as opposed to buying a certain number of units (stock) per period? It seems to me that you should be committed to buying $20.00 worth of gas, rather than to buying 10 gallons. That way, when the gas price is higher, you will put fewer (expensive) gallons in the tank. Conversely, when the gas price is lower, you will put more (cheaper) gas in the tank.

    The main difference from buying stocks this way is that you would buy gasoline when you needed it, say when you got down to a quarter of a tank, rather than once per month, or once per paycheck.

  • http://www.tnpcnewsletter.com/ DanB

    This is a little flipped from the dollar cost averaging used in investing. I use the a constant gallon number so I will know how far I can travel on the gas I purchase. My car is large and prices were high the $20 didn’t get me very far.

    Thanks for the comment.

  • Catmoves

    I’d like to suggest you read a recent book titled “Lives Per Gallon” wherein the author ( a highly placed man in the Scwartzenegger administration) tells the truth about these gas guzzlers and what to do about them. They are the primary reason for the poisons affecting our lungs. Enjoy your gas guzzler.

  • http://www.bryanpryor.com Bryan

    Yes, to get the full advantage of Dollar Cost Averaging with fill-ups, you should be buying in fixed dollar amounts, not fixed gallon amounts. Give it a try, buy $20 at a time rather than 10 gallons each time. You’ll see that you end up saving even more money.

    (Glad to see that I’m not the only nut out here dollar cost averaging my gasoline!)

  • Gary

    While this may lower the total cost of gasoline you pay for by a few dollars a year, how much is your time worth? I used to do this but decided the time it was taking to stop at the gas station more often wasn’t worth what I was saving. I do find the cheapest gas station in town and try to go there consistently rather than go to the closest one that can be .10 to .12 higher.

  • http://www.tnpcnewsletter.com/ DanB

    Catmoves. I do enjoy my gas guzzler. I get 12 miles per gallon and generally have 12 people in the car. So the mathematics work out just fine. So my option is to drive two or three cars to transport everyone. Can’t say that helps matters. As always there are two sides to anything.

  • http://www.tnpcnewsletter.com/ DanB

    Bryan you are correct of course I use a constant gallons to have a consistent distance I can drive.

    Gary you are correct too. Depends on your driving habits. In my case I live in a smaller town so I don’t always pass other stations.

    The gas where my parents live for instance is consistantly .10 cents less per gallon than ours. But on the whole if I fill up there I save about $4.

    Thank you for you comments.

    ~ Dan

  • J

    I had the same idea, and googled it to see if anyone else was doing it – and here you are.

    I agree with the other posters, though, that the way to do it is buy a set amount of dollars each time, not gallons. Otherwise, when gas is cheap, you are buying 10 gallons, and when gas is expensive, you are still buying 10 gallons. You’re not really dollar cost averaging.

    If you do it by price (for example, 15 dollars), when gas is cheap, you’ll automatically buy more (say 12 gallons), and when gas is expensive, you’ll automatically buy less (say 9 gallons). This brings your net cost down. You’re kind of accomplishing the same thing by what you said you’re doing (choosing to put more in when it’s cheap), but unless you do that, buying a set gallon amount won’t save you money.

  • http://www.tnpcnewsletter.com/ DanB

    I used a consistent volume of gas rather than a consistent dollar amount because I was driving the same distance. If you use a constant dollar amount then you may need to fill up more often as the price rises.

  • bill wald

    If a particular gas station seems out of line I only put in enough to get me to my next pee stop.

    Some towns seem like vampire towns with high prices where one can drive 20 miles and save a dime at any station. For example, Williams and Needles in Cal and Leavenworth in Washington. It would be more useful to have a listing of these vampire towns.

    The one good thing about $4 gas is that one might as well pay an extra dime for better gas. In the Pacific North West, only Chevron, Shell, and Union 76 meet Japanese standards for detergency.

  • Chris R

    If you think gas is expensive in the US, you should see what we’re paying in the UK. GBP 1.15 for a litre of unleaded works out at $8.54 per US gallon at the current exchange rate.

  • Chris W

    One way to save money on gas is to not use it to heat or cool your car while it is idling. For that matter, not using either at any time reduces summer/winter colds because you do not get exposed to quite as many huge temperature changes when you get out of your vehicle. Using just enough heat in the wintertime to keep the windows defrosted and bundling up has kept me more or less respiratory-infection free.

  • Leishalynn

    Excellent idea, Chris W. I go easy on the heating & cooling, & just use rolled-down windows when the weather is comfortable.

    & I only use either 76 gas or Chevron, because I agree with Chris R on quality. I also fill my old car with plus, not premium, because I’ve read that the difference in quality is greater between regular and plus, insignificant between plus & premium. I get *great* gas mileage and ride my bike to work every other day, so errands that require my car are consolidated, too.

  • http://netscape Lloyd

    Thanks Dan,
    Your, system is a.o.k. I all way’s have had to use such a system, thats why i know it works is in the interest of the consumer, know matter how you look at it.

    Any nation that is fast becoming a third world nation, and it’s natural resources being sent to other countrys, to make life better as our tax dollars to build nation states and rebuild there countrys after we level them, and get a civil war going between the different religous org.

    Will drop it there, but a better system as for as I can see when the corporate government and it’s political shills, have betrayed the citizens and the country, is to get some good walking shoe’s are a bike , or a motor scooter, like all third world nations do as a mode of transportation, or possibly if your a good roller skater, or there is always the safe and sanitary public transportation systems.

    The wonderful friends of our fearless leader, the Saudis, sell gas for 45 cents a gallon.I guess They consider george and America (A Hole Buddys).
    The last I heard petro was 45 cents a gallon in iraq, There getting a new infrastructure, air conditioning, utilitys system, and i might as well add the congress and senate house of non representative’s is adding to the American citizens problems, by bringing illegal aliens under the s.s. system, they don’t add much to the fuel consumption, and hiway destruction and congestion, forty to sixty million illegal consumers is good for the oil confederations.

    No attempt, by federal are state leaderss to stop the war that has been declared on the American citizens.

    People all over America are waking up the fact some org. is deliberately trying to destroy America and it’s peoples input government.

    Have any good ideals or sytems as how to correct this problem.
    Shalom
    Huh Duh

  • Stan

    I have a car with a 60 litre tank and depending on conditions get about 8-10km per litre. The price moves up and down usually over a weekly cycle but recently was stable for three weeks. when it moves, that can be by as much as 15 cents per litre or it may move 15 cents in three moves over 3 days..

    As I am in a large city with plenty of suppliers, I am willing to run it down to about 55 litres gone. If the price is high, I buy $20 worth (currently about 13 litres) which will take me 100-120 km (plus my 5 litre reserve). If the price is low in the cycle, I fill it up.

    I figure on average I am saving 10 cents per litre and using about 1200 litres per year – a saving of $120. I also figure that when I did a 300km round trip today by train rather than by car, I saved about $20 by using a train and a bus.

    Putting it in perspective – ditch teh car as much as possible!

  • Joe Kelly

    I use to live in New Jersey by the mouth of the Delaware Bay. In the seventies, when we were “running out of oil”, we had odd and even fillup days, and long lines at gas stations. Towards the end of the “oil shortage” I could see the tankers out in the bay, anchored bow to stern low in the water, waiting to go up the Delaware to unload. These ships were as far as the eye could see, in both directions. They would not move for days. As soon as the price of gasoline went up, odd and even and long lines dissapeared. So did the ships at anchor. The true reason for the high price of gasoline is because THEY CAN. Who is going to stop them. There is a way to slow them down… What if the American people stopped buying from ONE oil company for as long as it took to make them lower their prices to the point where they could still make a resonable profit. We would all have to agree on a company (any company) and stick to it. I favore the idea of starting out with WaWa, as they would also lose in their stores. We would have to be united in the company we picked. But, after all, we are being unitedly screwed by the oil companies. Why should one industry hurt the economy of this country, just to make BILLIONS (NOT MILLIONS) in profit?

  • Razmataz

    Another thing you can do is put K&N air filters in all your vehicles. I have used them in all my vehicles for years, & motorcycles for many years. They bump up the gas milage 2 to 3 MPG & give your vehicle about 10% power boost. They do not void warranty. The price average for one is about $50 which may seem steep at 1st, but they are good for 50,000 miles, can be cleaned once, & then good for another 50,000. At todays prices it doesn’t take long for them to pay for themselves.

  • Henry

    Sorry to stray a bit from the subject but I would like to remind those that already know and to tell those that don’t-the government makes far more money in the form of taxes per gallon of gas than the gas companies do. The gas companies, or more properly the petroleum companies only make 8-9 cents per gallon and what many call obcene profits is merely a function of the huge quantity of gas being sold. Few people would go into any business that required such a tremendous outlay of startup capital with such a meger return on investment as oil company’s have so I don’t begrudge them their profits at all. What do you think they do with their profits-have drunken orgies and talk over ad nauseum how to screw the public? They invest in their business and if they are really smart, and I am sure they are, they put money in something that is a less political and can promise to at least keep their business in business if the enviros ever take control of everything. If one is looking for the real culprits in our gas price increases look to world demand, our lack of refinery’s (thanks in large part to enviro’s) and our inability to tap huge proven reserves (again thanks to the enviros.) As a sidenote I want to laugh when people say we are running out of oil. My state, Colorado, has more oil in oil shale than Saudi Arabia. Granted it is harder to utilize but it is there nevertheless. And that is just one state. There are several more mid-western states that have as much if not more oil shale than Colorado. Then there are the huge deposits of tar sands in Canada that dwarf the oil shale deposits. And the list could go on and on and on.

  • Anonymous

    There is an article by the Pulitzer prize winning Tribune correspondent Paul Salopek called “Twilight of the Oil Age” or “A tank of gas,a world of trouble” which expresses my opinion about how complex this issue is.Permit me one quote from its 33 pages:”Few Americans realize it, but they have hitched their wagon–or rather their 210 million cars and trucks–to Africa’s troubled star.” You can read or watch the rest at:http://www.chicagotribune.com/news/specials/broadband/chi-oilsafari-html,0,7894741.htmlstory

  • http://www.mcbiz.com.au Peter Mac

    Reflect on this – petrol in Sydney, converting our litres to US gallons and converting $Australian to $US we currently pay about US$6.20 per USgallon. Now what was that about feeling badly?

  • http://www.mcbiz.com.au Peter Mac

    Reflect on this – petrol in Sydney, converting our litres to US gallons and converting $Aust to $US we currently pay about US$6.20 per US gallon. Now what was that about feeling badly?

  • bill wald

    Would rather see a website of towns with terrible gas prices. There are some entire towns with jacked up prices where one can save two bits or so a gallon by driving to the next town. For example, Leavenworth, WA, and Williams, Cal. One can save big time gassing in Arizona instead of Needles, Cal.

    On the other hand, with a small car, it doesn’t pay to go out of one’s way to save a dime, only 2% or 3% at current prices. Further, very few brands meet Japanese standards for detergency. On the Left Coast, Chevron, Shell, and Union 76. That’s worth an extra dime on $4.

  • http://none Phyllis Hanks

    Not all places have Costco Warehouses; but if you belong to Costco as I do the gas is cheaper there than anywhere else in town. I do all my grocery shopping there also; so make the trip every other week to get food and gas as Costco is 8 miles one way and the other is about 10 miles. I don’t drive as many total miles these days as I used to.

  • Thunder

    I agree with you regarding most details in regard to the increasing cost of gasoline. Seems as if gas prices vary nominally between stations in one’s local area. We most likely know where the best prices are and driving further eats up the savings. Maybe while traveling it could work, but for me it is more trouble than it’s worth.

    The problem is not solved with searchs on the internet or with cost averaging…most of us just need to get where we want to go.

    What will bring down the prices? Maybe the American people getting in the streets to voice their problem. Supporting the building of more refineries will create a greater flow of fuel.

    Alternative fuels may be a solution as long as it is efficient and doesn’t create other problems, and so the ethanol band wagon I choose not to ride in. It is anything other than cost effective and doesn’t really address the root issue.

    What of hydrogen? There are a number of people already using hydrogen in there cars (google water4cars). Part of the energy problem is due to corporate entities wanting control so they can profit. I support profits being made in any business endeavor, profit is not my issue. Control is the issue. We won’t have hydrogen available until the oil companies can build enough of hydrogen fuel stations to supply the demand. I will stop here on this because time and space here doesn’t permit a full disclosure now.

    The average American doesn’t know that Ford (for instance) sells cars in South American where the mpg are higher by law than here. I have forgotten which SA country has a minimum standard of 43mpg, fail to get 43mpg and the car can’t be sold there. So Ford sells cars down south, why don’t they sell them here? Almost pisses you off when you think about.

    For me, solving the problem rather than half solutions is what is important.

  • http://www.bizlinedirect.com.au Des West

    I thought I would add this which was sent to me by a friend from Durban.

    TIPS ON FUELING YOUR CAR

    I don’t know what you guys are paying for petrol…. but here in Durban we are also
    paying higher, up to R7.35 per litre. But my line of work is in petroleum for about
    31 years now, so here are some tricks to get more of your money’s worth for every litre.
    Here at the Marian Hill Pipeline where I work in Durban , we deliver about 4 million litres
    in a 24-hour period thru the pipeline. One day is diesel the next day is jet fuel,
    and petrol, LERP and Unleaded. We have 34-storage tanks here with a total capacity of
    16,800,000 litres.
    *Only buy or fill up your car in the early morning* when the ground temperature is still cold.
    Remember that all service stations have their storage tanks buried below ground. The colder
    the ground the more dense the fuel, when it gets warmer petrol expands, *so buying in the
    afternoon or in the evening*….your litre is not exactly a litre. In the petroleum business,
    the specific gravity and the temperature of the petrol, diesel and jet fuel, ethanol and
    other petroleum products plays an important role. A 1-degree rise in temperature is a big deal
    for this business. But *the service stations do not have temperature compensation* at the pumps.
    When you’re filling up *do not squeeze the trigger of the nozzle to a fast mode*. If you look you will see that the trigger has three (3) stages: low, middle, and high. In slow mode you
    should be pumping on low speed, thereby minimizing the vapours that are created while you are pumping. *All hoses at the pump have a vapour return.* If you are pumping on the fast rate,
    some of the liquid that goes to your tank becomes vapour. *Those vapours are being sucked up and back into the underground storage tank so you’re getting less worth for your money*.
    One of the most important tips is to fill up when your tank is HALF FULL. The reason for
    this is, the more fuel you have in your tank the less air occupying its empty space. Petrol evaporates faster than you can imagine. Petroleum storage tanks have an internal
    floating roof.
    This roof serves as zero clearance between the petrol and the atmosphere, so it minimizes
    the evaporation. Unlike service stations, here where I work, every truck that we load is
    temperature compensated so that every litre is actually the exact amount.
    Another reminder, if there is a fuel truck pumping into the storage tanks when you stop
    to buy, DO NOT fill up–most likely the petrol/diesel is being stirred up as the fuel is being delivered, and you might pick up some of the dirt that normally settles on the bottom.
    Hope this will help you get the most value for your money.

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