Emotion, money and decision making

Library Bitch has a great blog today on gas prices and how the signs should read. Check it out here.

But while that's funny, and it rings true to my emotional self, in reality gas prices aren't bad historically speaking. What is happening here is a disconnect between reality and what we feel. This is largely behind the popularity of the new hybrid vehicles which cost more than they save (at least for most people) but the extra cost is at the car lot, where we're typically willing to spend money, and the savings is at the gas pump, where we hate to spend money.



I'm not the best example since I drive less than average but since I'm available I'll use myself to illustrate. I drive 13 miles to and from my bus commuting lot each day. I drive a small truck that gets about 26 mpg so each day I use one gallon of gas. 5 gallons a week. 260 gallons a year plus about 240 gallons for extra driving during weekends and vacations. So 500 gallons a year. If gas goes up $1 a gallon I have to budget an extra $500 a year or $10 a week. That's pretty small potatoes considering what people pay for a cup of coffee at Starbucks. As for hybrids, in my case I'd barely save a dime on gas since the hybrids mainly get improved gas mileage during city driving and I'm doing at least 95% of my driving under highway conditions. For some odd reason people seem to associate hybrids with electrical vehicles but hybrids get 100% of their energy from gas. 100% Their better gas milage stems mainly from their storing some wasted energy during braking--which is done mostly in stop-and-go city driving--in a battery and using that potential energy kinetically to assist in initial acceleration. They also switch from gas to battery when idling.

Don't get me wrong, I'm not knocking the technology. Personally I think every single car sold should have hybrid technology--but it's not a smart choice from a financial perspective. At least not now while the cost of the hybrids is at least $3,000 more than their conventional counterparts. On the green side of the coin, the most pollutive aspect of driving is that initial acceleration from a stop and that's when battery power is used in a hybrid. We really need to have this technology to be mandatory--in which case the cost would decrease drastically. Write your congressman (or woman) now!

Back to economics, I agree that the cost of gas is too high. Witness the record setting profits lately of the oil companies--and their whining to congress that they need lessened regulation despite those profits. But despite the price gouging, gas prices don't really hit most of us very hard. But they still affect us emotionally far more than price increases in most other areas. Why is that? I don't know--and it's true for me too. I cringe when I see prices over $1.75 a gallon and we're nearly $1 over that now. Even though I know that gas costs about the same as the milk I buy and far less than specialty coffee and other 'splurge' items that we all indulge in. It's a puzzle but that's part of our thinking emotionally and not rationally. How I do run on and on...