Jon Aquino's Mental Garden

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Thursday, December 29, 2011

Buying gas like an investment

My brother does this interesting thing when he buys gas, similar to "dollar cost averaging" in investing (i.e., investing the same amount each month, regardless of whether the price is high or low).

Basically he pays the same amount at the pump on each visit ($20), regardless of whether gas prices are high or low.

I was trying to think if this has any real benefit, and actually I think it does. When gas prices are low, $20 will last a long time, which is good. When gas prices are high, $20 will last a short time, and you will be forced to retry again soon - so you will have more frequent opportunities to try again for a lower price. Kind of makes sense.

Compare this to filling the tank to the top every time. You will be visiting the gas station at a constant time interval, without the automatic adaptation mechanism described above.

Interesting!

4 Comments:

  • Hi Jon, I recently discovered your blog. Good to see some new posts! Thanks for the "how to live in 24 hours" tip, duly read and under implementation.
    It would be good to see more of your poems.

    By Blogger phil, at 12/29/2011 1:51 PM  

  • Thanks Phil!

    By Blogger Jonathan, at 12/29/2011 4:45 PM  

  • However, if prices rise for a long sequence of gas-ups, one could deplete their tank, and then have to buy more at the peak. (Solution? Start the sequence with a full tank, or, drive fewer and fewer miles, as prices rise.)

    By Blogger mike zim, at 1/15/2012 10:54 PM  

  • Ah - interesting point and solution, Mike!!

    By Blogger Jonathan, at 1/16/2012 7:58 PM  

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