Threes Across the Board

Last summer, when regular gasoline in this part of the country was about $2.70 a gallon, the first of its kind California SUV Fill Up Index was published at this blog. While the $2.80 and $2.90 marks came rather quickly, it has been over six months since the last update.


The three previous posts were here, here, and here, which ultimately led to some investigative reporting on the impact that high gas prices were having on vehicle sales.

A pledge was made early on to update the index with every ten cent rise in the price of gasoline, and after admittedly losing interest in recent months as prices dipped to a low of around $2.15, a recent surge to over $3 has necessitated dusting off the spreadsheet and plugging in the new figure to freshen up the rest of the data.

Not that $3 gas makes any difference to SUV owners in this part of the country.

Not that Ford Excursion drivers with stick figure representations of their seven member family (including two pets) on their rear window would compromise the lifestyle to which they've become accustomed for a nuisance such as making ends meet.

Why?

Because they're nearly all homeowners.

And, when you have hundreds of thousands of dollars in home equity, easily accessible whenever you need it, an extra hundred dollars a month isn't going to change what you do.

In fact, should gas prices go to $4 or $5 a gallon, the best way to handle this annoying extra cost without changing your lifestyle would be to have one of those credit cards that are hooked up directly to your home equity line of credit.

That way, the extra fuel cost just gets tacked onto your mortgage balance.

Taking this approach one step further, if you have the monthly interest payment on the home equity line of credit automatically charged to your credit card which then automatically accesses the line of credit once a month, that would be the best of all possible solutions for sustaining the unsustainable.

So, $3 a gallon?

Not a big deal if you live in California, as long as you own a house. Here's what it looks like at the pump.


Two Toyotas over the $75 mark - that looks strange. And the Hummer H2, how might they be selling these days?

Clearly the solution is smaller gas tanks, or as many SUV owners have discovered, to fill up more frequently - to never let the tank get much below half full so as to lessen the shock. Either that or the credit card - home equity deal described above.

In the very first edition of this index last year the following comment was made regarding the price of oil, peak oil, and monetary policy. It is worth repeating as many may wonder what the cost of filling up an SUV has to do with the name of this blog:

One of the most intriguing aspects of peak oil and its impact on oil and gasoline prices is the role of China and the U.S. Federal Reserve. It is clear that the monetary stimulus applied by the Fed since 2001 has had a large role in the economic boom in China and has resulted in a dramatic increase in oil consumption in that part of the world.

This increased demand is, to some degree, driving today's oil price. Whenever peak oil does occur, it surely will be sooner than it otherwise would have been had U.S. monetary policy not so stimulated these economies half way around the world.

Did the Greenspan Fed cause $65 oil? No, but they sure haven't helped to keep the price down.

Food for thought.