Thursday, October 06, 2005

NYC Money and $7 gas prices thoughts

I was reading the post by my blog buddy at NYC Money about gas prices.

It must be nice to not have to need a car, to save on gas, insurance, maintenance and payments. Gas prices are the real killer.....or are they?

It got me to thinking. As I live in Los Angeles home of the Notorious 405 freeway. The only freeway in the world that has a 60% chance of a traffic delay at 1:25 am on a Saturday. How I have longed for a toll for that freeway. Maybe I will get my wish after all. Think about it, when McDonald's raises their prices on Big Mac's how many NFL players even notice? And what about your soy milk? Last year 2 for $5, this year 2 for $7. If you have a decent amount of wealth and income, these price rises are often blessings in disguise. Smaller lines, equals more time, equals less mistakes, equals fresher offerings, equals less stress. Hell I think $7 gas prices could end world hunger and bring peace in the middle east, j/k!

If gas prices went to $7, many people would cry but I would be happy. I would have the means to drive and not only that I would get back so much time. Lets say you have a job that pays you $30 an hour, or roughly $57,000 a year. This means that your time per hour is worth at least $30. If you want to drive from Orange County (Anaheim) to San Fernando Valley (near Hollywood) at 4:00pm the distance is roughly 85 miles round trip. With no traffic the trip should take no more than 1.5 hours. Lets add traffic and the time is more like 3-3.5 hours driving. You have wasted or not optimally used a finite resource called time, doing what? Flipping driving an automobile! With the additional 1.5 hours your time is worth $45, but many people would complain about the additional $$25 ($4 more for 6 gallons with a car with at least 21 mpg, Ford Explorer) in gas it would take to complete the trip.

Now imagine that same logic but instead of 60,000 per year, add a zero to 600,000 per year. Instead of $30 per hour its $300 per hour. This is the rationale that many wealthy people consider when small things like gas prices rise. Even at $3, gas is still cheaper than milk, per gallon, and milk prices are subsidized! Food for thought.


nyc money said...

I remember hearing someone on TV say that gas is cheaper than bottled water. Scary stuff.

pfadvice said...

I love not driving.

Living in Japan where there is an excellent public transportation system and where driving is extremely expensive - gas, most highways are toll roads, parking spaces are required to have a car and can run several hundred a month to name just a few - you learn that driving isn't all that great.

When I go back to the US, I dread that I will have to drive everywhere...

Thumb said...


Great post. I think you hit on key point on how the average person doesn't understand how much their time is worth. I referred to your post in my latest entry (I thought I'd let you know since you don't have trackback links).


Devon Reese said...

I am a fan of this post. However it does present the idea of segregating the more wealthy from the less fortunate. I am not trying to be the voice of the people. but in a sense you are talking about limiting the highway to those who can afford it.

instoremarketer said...

People would still drive as much as they do now even if gas cost $10 / gallon. Sad, but true.