By Chris Wood, CPA - It is time to update my post from last April 23, “The High Cost of Gas”. In that post, I calculated the daily cost to travel 100 miles for my Nissan Sentra which gets 34 miles to the gallon. I got the cost right ($10.29), but I transposed some figures on the calculation I had shown:
- Assume 100 miles and $3.50 per gallon (MPG/100*3.5)
The actual formula is:
How embarrassing. Well, nobody called me on it so maybe not so bad. But this does help illustrate the abstract concept of miles per gallon. Researchers at the Fuqua School of Business at Duke University determined that “Posting a vehicle’s fuel efficiency in “gallons per mile” rather than “miles per gallon” would help consumers make better decisions about car purchases and environmental impact”.
To illustrate go here to take the MPG illusion test:
Here is a table that compares MPG to Gallons used per 100 miles.
The European average for the week of July 7, 2008 is 9.36 per gallon. The last time the European average was under $4 was December 2002. What happens if we drop in their average?
The price of gas more than doubled (4.00 to 9.36), but the savings went up almost 6 fold ($2,108 TO $12,168). The fuel cost for driving 26,000 miles in a Hummer in Belgium is about $24,000. That’s just about the cost of a Prius.