Holiday Driving, Gas Prices, and Quantation

Dec 28, 2013

At this holiday time, what could be more festive than driving all over the place in your car? Of course, at today’s gas prices visiting far-flung friends & family can be expensive. A partial solution is to drive a few miles out of your way and buy cheaper gas.

Now, if you’re like me, you’re wondering: Is this worth it? Does the price saving justify the additional miles you have to drive? Doing the calculation without a spreadsheet or a calculator can be a little daunting, but some of you may find this shortcut helpful, which takes advantage of one of the more powerful tools in the quantation arsenal: the ratio.

Here’s how it works: Simply compare (A) the percentage increase in miles you’ll need from the upcoming tankful as a result of your cheap gas detour to (B) the percentage decrease you’ll get in the price per gallon. If (B) is greater than (A), then you’ll save money by driving farther to get cheap gas.

An example: Suppose that your gas tank is nearly empty right now, and you’ll get about 500 miles on your next tankful. You’re right by a gas station where the price is $4.00/gallon. However, there’s a station 10 miles away – for a total detour of 20 miles to go and come back – where the price is only $3.60/gallon. This means that you’ll drive 4% more miles on the upcoming tankful (20 miles is 4% of 500 miles), but the gas is 10% cheaper (the $0.40 difference is 10% of $4.00). Since in this example (B) is greater than (A), you save money by driving to buy the cheaper gas.

In summary, going for the cheap gas is likelier to be the cost-saving solution. . .
  • the shorter the drive is to the cheaper gas station,
  • the bigger the price difference between the two gas stations, and
  • the closer you are to an empty tank.

I hope you find this helpful. Equally important, it illustrates a fundamental tool in the quantation toolkit: namely, that is, a quick comparison of a couple of ratios can be the most effective and quickest way of choosing between two complex alternatives. This is true in both business and day-to-day living.

Enjoy the holidays! And drive safely.

“Painting with Numbers” is my effort to get people talking about financial statements and other numbers in ways that we can all understand. I welcome your interest and your feedback.

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