This week gas has hit an average of $4.00 a gallon for gas in the USA. As many people are surprised by this astonishing price tag many others have been preparing for this day years ago. I so happen to be one of these annoying people stating that gas would go up and people with an SUV would cry about it. Let me go over a few steps I took to analyze why this time would come and how you as an individual can approach rising energy prices.

First, take a look at the thing to look at is how many other countries are becoming more developed in the world today. If you look at China they are expected to have more vehicles in their country than the US by 2010. This means the supply of oil will be reduced causing the price to go up. How does this relate to you? If gas prices are variable you want to reduce that cost as much as possible. You also want to expect the worse. Anytime I see gas at $4.09 I reevaluate my budget for gas to be $5.00 a gallon. More than likely the use of oil will be rising before it declines, so start expecting the worse.

Second, watch the airline industries and look at their approach to energy cost. This can be very educational, especially watching Southwest. I say this is because Southwest has learned how hedge their variable cost like fuel by buying cost effective contracts to help them save money and hedge against rising fuel cost. If you wanted to hedge against your risk have you thought about investing in oil stocks? If you complain gas prices then this is a perfect way to rejoice the rising fuel prices.

Third, a nice polished machine will always run better than an old rusty machine. What this means is look at your vehicles overall cost a year.: maintenance, fuel cost, repairs, etc. Now look at a newer model of a vehicle and compare with the old. Obviously, if the price tag happens to be cheaper for the newer vehicle it maybe worth it to buy a newer car. I recently figured this out buying my new car compared to keeping a small pickup. The gas mileage was better, the repairs were minimal, it didn’t leak oil, and it was cheaper to finance since it was new. If you haven’t looked at all the different cost of owning a car start an excel sheet. Then as time goes on you will have records to compare with the new car you are starting to analyze.

Be sure to look at the whole picture when purchasing any item not just a vehicle. There are many things that can be encompassed in cost. This can include time, repairs, gas, etc. Make sure that you have an understanding of all of them or it could cost you in the long run.

What is your tip on saving gas? Please feel free to share your thoughts about the overwhelming gas prices.

Tags: gas, money, small business

This entry was posted on Monday, June 9th, 2008 at 6:07 pm and is filed under Economy, Management, money. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.