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Since the price of gas has been going up so much lately, I have tried to make a conscious effort to try and drive less. Besides the fact that is makes sense for me economically, it is good for the environment as well. I am proud to say that I have gone over an entire month without filling up my tank. What makes this even more impressive is the fact that my car only gets about 250 miles per tank. The last time I filled up my car was 7/22/2008. That makes it a month and three days as of today, and a month and four days as of tomorrow.

I have a few theories about why I managed to accomplish this feat. 21 days had been my previous tops since I bought the car in October 2007. The main reason I think that has contributed to my decrease in driving is my new living location. Previously I had to drive back and forth to the park and ride each day. It worked out to about 8 miles each day in driving. It doesn’t sound like much, but if you think about it, that is 40 miles per week. My car only gets about 17 mpg in the city, so that means I went through 2.35 gallons per week. Now I have an extra 2.35 gallons per week to do something else with. I can also walk to the grocery store now instead of always having to drive. That saves at least 2 miles per trip as well.

All in all I can’t say I am too upset with not driving as much. It has definitely saved me a bit of money as well.

Although the price of gas has dropped a little bit over the past few weeks, it is still really expensive to fill up. Here in Seattle, premium gas is over $4.30/gallon. For me, this means that I am paying $.24 per mile to drive my car. While there are a lot of trips where driving a car simply makes more sense, I am starting to find that there are quite a few trips that can be just as easily traveled by bicycle.

In order to assist me, I have a speedometer on my bike to assist me in calculating my distance. To be specific, the bicycle computer that I use is the Sigma 906. It currently retails for $22.98 at Pricepoint.com. It is a pretty simply bicycle computer. It is nothing too fancy, but it takes care of the essential functions like trip and total distance, current speed, max speed and average speed. My only gripe is that I haven’t been able to find an easy way to reset all of the values of a trip. If I erase the trip distance, the trip time will remain active. Because of this I have to go through and manually reset every statistic.

Anyway, I am using this bicycle computer to help me to track how much I have saved on riding my bike. So far I have ridden 16.82 miles, which has saved me $4.04. This isn’t much, but it can add up over a course of a year depending on how much I actually ride. For the most part I am able to keep up with traffic and Seattle does a good job of providing bike lanes and other places to ride. I would be a bit quicker if I had a road bike instead of a mountain bike, and slick tires instead of knobby treaded ones. So far I have ridden to the book store, the drug store, and my girlfriends place and back.

The best part is even if I am not saving money, I am still getting some exercise in the process.

Gas prices continue to rise across the country. Here in Seattle, a gallon of regular costs $3.51 at the local Shell station. Seems crazy to think that about a year ago the price was about a dollar less. We have a few factors that are contributing to this rapid increase in price.

First of all is the obvious. Refining capacities can only go so high, and the demand for oil continues to rise each day. Using the classic model of supply and demand it is very easy to see why prices have risen. If we put more fuel efficient cars out on the roads we would theoretically demand less gas because we would be using less of it. I think that when people have vehicles that get better mileage they will drive more. They will use the better mileage as an excuse to drive more and make more unnecessary trips, causing them to demand exactly the same amount of fuel.

The second main reason that gas prices have risen is because the dollar has decreased in value in comparison to other world currencies. Think about it for a minute. Most of the gas that we consume we import from other countries. When we buy foreign oil, we must convert our currency into theirs to make the transaction. If we assume that the price of oil remains constant in a foreign currency, and our currency is losing strength to the foreign one, it is easy to see why the price of oil would greatly increase for us.

Imagine that in 2007 $1 was worth $5 in a foreign currency. If a barrel of oil cost $100 in the foreign currency, it would cost us $20 USD to buy the barrel. Suddenly in 2008 our $1 is only worth $4 in the foreign currency. That same barrel of oil still costs $100 though. Because of the change in the exchange rate, it now costs us $25 to buy that same barrel although the price in the foreign country has remained the same.

It is interesting to see how supply and demand are not the only controlling factors on the price of gas in the United States.

This weekend my girlfriend and I went down to Portland, Oregon to visit some friends. It is always nice getting away from all the hustle and bustle of Seattle and going somewhere different. Portland is a nice city that seems to be quite a bit smaller than Seattle, but is not lacking in any of the amenities of a larger city. One of the main draws for people to the Portland area is the fact that Oregon does not have a sales tax. According to Taxadmin.gov, there were only five states that had no sales tax as of 1/1/2007. Those states were: Alaska, Delaware, Montana, New Hampshire and Oregon.

The sales tax in Seattle is roughly 9%. When we go down to Portland, we like to take advantage of the fact that there is no sales tax. I got to thinking on the way down that there is probably a decent population that drives from Seattle to Portland and back in one day just for shopping. These people have no other reason to visit the city (ie: visiting friends/family, sightseeing etc.) They only make the trek to save some money. I started to think about how much money a person would need to spend in Portland so that their tax savings would equal what they spent on gas to get there.

The trip from Seattle to Portland is roughly 175 miles. This would make the round trip (175 x 2 = 350 miles). Let’s also assume that the car being used is fairly economical and gets 30 miles to the gallon and gas is $3.10 a gallon for regular (which it currently is in our neck of the woods). It would take the car (350 miles/30 mpg) 11.67 gallons of gas to make the whole trip. At $3.10/gallon, it would cost (11.67 x $3.10) $36.16 to make the trip. In order to save $36.16 in taxes, one would have to spend ($36.16/.09) $401.77. At this spending level, you would be no better off than shopping in Seattle. Anything spent over this amount, and your trip would be a success. If you spent any less than this amount, then it would actually cost you more to shop in this tax free environment. If you decided to carpool with a friend, then you would only have to spend half as much to break even.

Let’s take a look at a chart that shows how much you would need to spend based on the mileage of your car in order to break even.

Obviously, the worse the gas mileage, the more you would have to spend on goods to break even. Here is something else to think about. The lower the differential between tax rates, the more you would have to spend to break even. Lets go back to the 30 MPG example. Imagine if the tax rate in Seattle was only 6%. Here is how much you would have to spend. 350/30 = 11.67 gallons of gas x $3.10/gallon = $36.16 to make the trip. Now, we divide $36.06 by .06 rather than .09, and we get $601. With a change of only 3 percentage points, a consumer must spend almost 50% more to break even!

The lesson learned in this story is that although tax free purchases may sound good on the surface, you must spend a lot to make the trip worth it.

I have attached to this post a graph I created in Excel that shows how as MPGs decrease, one must increase their spending to make the tax free savings worth it.