The average price of gasoline has climbed to more than $3.70 per gallon, and the prospect of having to pay $5 per gallon is looming large in the minds of consumers. Already there's a rising spirit of panic among Americans — and certainly among some media outlets. There are people who will be tempted to dump their current cars for more fuel-efficient models, while others will fall prey to the latest gizmos and concoctions from the auto parts store.
Don't be one of them.
What makes sense is to think about the way you use your car. Then change your driving habits. If you decide that you need a new car, shop smart for a fuel-efficient model. Strategy is what you need, so we've organized a number of sensible measures that will let you ride the rising tide of gasoline prices with minimal distress.
Where Are Prices Going?
Gas prices increased 20 cents over the span of four weeks in February, driven in large part by a growing fear that developing Middle East tensions would result in a substantial oil supply disruption — namely, that Iran could limit passage through the Strait of Hormuz, through which 20 percent of the world's oil travels. This information comes from Lacey Plache, Edmunds chief economist.
Gas prices are high for this time of year, but remained below weekly highs of $4.17 in July 2008 and $4.02 in May 2011, Plache notes.
Some analysts are warning that gas prices could rise as high as $5 by summer. One of them is John Hofmeister, who was the chief of Shell Oil's operation in the U.S. from 2005-'08. Hofmeister is now the head of Citizens for Affordable Energy, a nonprofit advocacy group that he founded. Early last year, he predicted $5-per-gallon gasoline in 2012, and is standing by that prediction. He says that the U.S. is headed for record-high gasoline prices if it continues to produce only 7 million barrels of oil per day, since the nation actually uses 20 million barrels per day.
Put together geopolitics, limited U.S. production and "unprecedented" increased oil demand by China, and the result is higher crude oil prices, Hofmeister says.
Survival Strategies for Car Owners
So that's the doom-and-gloom scenario. Here is some advice from Edmunds experts on how to cope:
Figure out the mileage you get in the cars you drive now. This will help you see the actual impact of the price increases, measure any improvements you attain by changing your driving patterns and help you decide whether it would make sense to move to a more fuel-efficient car. In addition to paper-and-pencil record keeping, you can use Web sites such as Fuelly.com to track mileage and gasoline costs online.
Realistically assess what rising gas prices mean to your family. The impact might not be as dire as you think. Or if gas prices do threaten to sink the budget, it might be time to reexamine how your household is spending money overall.
Save fuel by changing your driving style and attending to simple car maintenance: Edmunds editors have rigorously tested driving styles, aerodynamics and some basic car-maintenance steps to measure their effect on fuel economy. By far, the largest fuel-saver was a switch to calm driving. Compared to a fast, lane-changing, sharp-braking style, calm driving improved fuel economy by 35 percent. Conversely, driving on underinflated tires lowered fuel economy by an average of 3.75 percent.
Get the big picture on gas prices. Use sites such as Gasbuddy.com to check prices in your area, but don't drive across town to save a few pennies. Some other strategies for minimizing the cost of gas include using cash-back gasoline credit cards (which you should pay off monthly), or getting gas at membership stores such as Costco or Sam's Club.
Don't immediately dump your gas-guzzling SUV: That instinctive reaction could cost you money. As Senior Consumer Advice Editor Philip Reed points out, the resale value of an SUV drops "as fast as the needle on its gas gauge" when gas prices are high. The taxes and fees on new cars are considerable. And the demand — and thus prices — for fuel-efficient cars tends to climb along with gas prices. If you still have the urge to switch to a more fuel-efficient car, use this gas-guzzler calculator to assess how long it will take for the switch to pay for itself.
Don't buy "gas-saving" devices. Most of them don't work, according to the Environmental Protection Agency (EPA). The EPA's list of the top 10 misconceptions about fuel economy is also instructive. Manual transmissions don't always deliver better mileage than automatics, for instance.
New Choices, Shopping Challenges for New Car Buyers
In some ways, Americans may be in a better position in 2012 to deal with expensive gasoline, as far as the availability of fuel-efficient vehicles is concerned at least. Auto manufacturers are driven by federal mandates to build more cars that get better fuel mileage and some of those efforts are arriving just in time for higher gas prices.
For starters, carmakers have improved the efficiency of their conventional internal combustion vehicles. For the 2012 model year, there are nine conventional-engine cars with an EPA highway rating of 40 mpg.
Automobile companies have also achieved smaller incremental fuel-efficiency gains with popular vehicles. A 2008 Honda Accord had a combined city/highway rating of 24 miles per gallon. A 2012 Honda Accord gets 27 mpg combined. Automakers have achieved even better results with diesel versions of some models. The 2008 Volkswagen Jetta had a combined mpg of 24. The 2012 Jetta diesel betters that by 10 mpg, achieving 34 mpg.
Even the gas-gulping, best-selling Dodge Ram Pickup 1500 has bettered its fuel efficiency a bit, rising from 15 mpg combined for the 2008 model to 16 mpg for the 2012 model year.
There also is a wider array of hybrid and pure electric cars for shoppers to consider. For the 2008 model year, only 13 vehicles could achieve a combined city/highway rating of 30 mpg. In 2012, there are 46 such vehicles.
At the top of this list in terms of fuel efficiency are such electric cars as the 2012 Nissan Leaf and the 2012 Mitsubishi i, both of which deliver the equivalent of more than 90 mpg.
The granddaddy of hybrid fuel-savers, the Toyota Prius, has managed to better its fuel efficiency over the years. It had a combined rating of 46 mpg in 2008. In 2012, it's getting 50 mpg combined and is tied for the top spot on the EPA's 2012 list of the most fuel-efficient non-EV models. The car that shares the top spot is the compact 2012 Toyota Prius C.
But in Hofmeister's view, these advanced technology vehicles won't help the vast number of American drivers. "There may be some well-to-do people who are moving down the path of alternative vehicles, but that's a very small number," he says. "The ones who are most impacted are the ones who can't afford hybrids or battery-powered cars to begin with."
If you're in the market for a car, Edmunds experts offer these strategies:
Do your fuel-efficiency homework before you shop. Take a look at our list of gasoline-powered cars that deliver 40 mpg on the highway and our list of conventional, hybrid and electric cars that achieve at least 30 mpg in combined city/highway driving. The 10 most fuel-efficient vehicles for the 2012 model year can be found on the EPA's list.
Check our real-world comparison tests. Check the results of Edmunds' most recent Fuel Sipper Smackdown, as well as the tests we did in previous years, including Fuel Sipper Smackdown 3, which featured SUVs, and the 2009 edition, Fuel Sipper Smackdown 2, which tested a mix of conventional and hybrid cars.
Shop smart for fuel-saving cars. When gas prices spike, so do the sales of small, fuel-efficient cars. In February 2008, when gasoline was $3.03 per gallon, small cars had a market share of 17.9 percent, according to Edmunds data. By May, as gas prices rose to $3.77, small-car market share grew to more than 27 percent. At the peak gas price of $4.08 in July 2008, small cars accounted for 24.4 percent of sales. In December 2010, Toyota Prius sales topped 15,000, driven by unseasonably high gas prices and generous incentives, says Edmunds analyst Ivan Drury. That was the highest monthly sales figure since the Cash for Clunkers sales spike in the summer of 2009. It can be frenzied out there, and sometimes the competition drives up prices. Prepare yourself with these tips and tactics for buying a fuel-efficient car. They can shield you from an overheated sales environment.
Consider something smaller: "Some people's lifestyles demand a larger vehicle. But those who can switch to a smaller vehicle will often find that they save money on the purchase of the vehicle, on fuel costs and on maintenance — all with only a slight trade-off in size," says Edmunds Consumer Advice Associate Ron Montoya.
If you really do need something bigger, take advantage of this buyer's market. If you need a new SUV big enough to haul around your youth hockey team, or a large heavy-duty truck for work, a gas spike could be the very time to buy. Lots of people will panic and dump their big, burly vehicles. And some dealers will be stuck with new large vehicles that are suddenly hard to sell. When gas prices skyrocketed in the summer of 2008, dealers priced large SUVs and large trucks at 20-23 percent off their manufacturer-suggested retail prices, Drury says.
If we do indeed hit $4 per gallon again, that's the time to strike, Drury says. He suggests identifying the vehicle you have in mind online and tracking it as it ages on a dealer's lot. The discounts go deeper the longer the vehicle sits.
"If you're looking at it and it's past 60 days, that's good," he says. Past 90 days is even better. "Ninety-plus days is bad for dealerships."
There are winners and losers when gas prices rise. Have a plan to make sure you're on the winning side this time.
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