Tuesday, July 1, 2008

How much does it cost to drive?

The IRS formally increased the number it uses for cost per mile car travel, from 50.5 cents per mile, to 58.5 cents per mile. The question for drivers is -- are you sharing that cost or sucking it up all by yourself?

I recently did an analysis of AAA 2007 cost data for driving. I wanted to understand how much the rising cost of gas is actually changing the real costs of driving. [These aren't quite real costs since they don't include any of the externalities associated with driving like global warming, protection of oil resources, asthma, car accidents, among others.] AAA numbers are averaged over five years, assuming you own the car for the first five years of its life.

Today, with gas at $4 a gallon, looking at the two extremes of car types, it costs

$18.60/day for a small sedan ($6,795/year)
$31.00/day for an SUV or pickup truck ($11,309/year)

This covers travel of 41 miles per day (15,000 miles per year), average for Americans.

When -- not if -- gas goes to $5 a gallon, it'll be

$21.66/day for a small sedan ($7,906/year)
$33.32/day for an SUV or pickup truck ($12,161/year)

What was particularly interesting to me is how the rising price of gas has transformed the variable costs of driving. When gas was $1/gallon, it was only 9% of the total cost of owning and operating a small sedan. Today, at $4/gallon, gas ranges between 28 and 30% of the cost of operating a car. When it is at $5/gallon, that'll be 32-35%. With such high variable costs, people are really having to think twice and three times about when and how they drive. [see blog entry on changed driving behaviors]

This is so much money!!!

Back in 2006, 17% of household income went toward cars. I ask myself: if the median household income in the US is $48,000/year, what percent of income is going to car transportation today? A recent study found that in households with cars, they own on average 2.28 cars per household. Now comes some very murky and suspect assumptions, just to get it into the ballpark. Those households are unlikely to have 2.28 new cars, so what if we just round down and say 2 cars that are 0-5 years old are going to stand in for 2.28 cars of unknown age. And that households will have one big car and one little car, which is kind of like saying they have 2 average-sized cars.

OK, if we accept these bad assumptions, the answer to the question:

What percent of household income is going today to car transportation when gas is $4/gallon?




Another way to look at this is to use a a report written in September 2005 by Mark Singer of the Consumer Federation of America. His estimates of gas prices for 2005 were about $1.80/gallon. For prices found between 1995-2003 (his baseline) he found little elasticity in demand. Here is his table:

We know that $4/gallon seems to have been a tipping point for demand. And $4 is more than double $1.80. But what if we imagine that people today are spending about double on gas, taking into account some reductions in demand? That would put low income groups spending 20% of their incomes just on the gas.

Washington, I think we have a problem.

Americans need options to traveling around by car all by themselves. Some of those options can happen fast (GoLoco! and for those lucky enough to live in cities feet, bike, transit, train); some will take longer (changing where we choose to live, work, shop, creating dense mixed use communities, adding more transit of all kinds, reducing fossil fuel dependence on all motorized modes).

Next Mr. President: are you listening?


Anonymous said...

Robin, today I learned of you and GoLoco via your talk posted at ted.com. I'm a city dweller who commutes to and from work by train and bike, and I also run errands from home by bike. I also own a car that's fun to drive and is rated highly for road safety, a car that I'd be happy to ride-share through GoLoco (at least in theory). However, as a city dweller I'm no fan of road traffic/congestion. Hence, for starters, envisioning the planning and logistics of a GoLoco trip in the city is less than appealing. For example, is it realistic to select a "specific meeting place and time" (as said in the GoLoco FAQ) for a trip involving multiple passengers? It seems more so likely that for such a trip passengers would prefer/necessitate being picked up at different locations--unless all (or most) agree to meet at one place (by car? Hm.). Interestingly, at the end of your blog article, "How much does it cost to drive?" you intimate that GoLoco might not be optimal for city folk since they can typically run errands by "feet, bike, transit, train". GoLoco within-city ride-shares could work out fairly well or hassle-free among friends especially. But there are logistically simpler (and more cost-affordable) ecologically sound solutions than GoLoco for such trips (at least among car-owning friends). For instance, reciprocal altruism: "I'll drive us this time; you drive us next time." We can understand easily how GoLoco can be of practical use to rural residents, but for many city dwellers the idea of getting online and pushing more than a few cell phone buttons to get a group vehicle moving in dense traffic is probably more work than they're willing to muster energy for. The dearth of responses to your excellent blog posts might be an indication of this (unspoken) sentiment, Robin, but let's hope I'm wrong about that. At any rate, you've inspired me and others to green-think anew, so thank you!

Matt said...

We all need to change our habits to travel around by car. Goloco gives the options and is a great way to make new friends, save some money and support the environment by reducing our carbon footprint.

Anonymous said...

i will charge people based on distance & other charges depend upon the car type & facility