I've been poking about the fuelly site, although I don't have an account.
They have some tips submitted by users. I'm struggling to get my head round this one. I know I'm not very bright as a rule - could someone explain this to me in another way? I don't seem to be able to grasp it.
----------------------------------
Buy fuel cheaper with dollar cost averaging
Save money at the pump by using a trick smart investors use to buy stocks. Instead of filling up at the pump, buy a set $ amount each time you gas up. This will always buy more fuel when prices are cheaper and less fuel when prices are higher. Over time you will average a lower price on gas purchases. guaranteed.
|
Its American thinking. They have no idea about total annual consumption.
And its an idea that works very badly over here! (paying for your fuel in $ that is)
|
|
Well according to my test spreadsheet, buying more when it's cheaper and less when it's more expensive averages out cheaper than buying a set amount each time. Unsurprisingly.
Last edited by: Focusless on Wed 21 Jan 15 at 12:33
|
|
Try changing the currency to £ and the quantity to imperial gallons, that should fix it. :)
|
>> Well according to my test spreadsheet, buying more when it's cheaper and less when it's
>> more expensive averages out cheaper than buying a set amount each time. Unsurprisingly.
Only works if you can travel only on cheap days.
|
Only works if there are major fluctuations in price.
As I tend to use a tank of fuel every 3-4 days, it makes little difference for me, especially when you factor in the cost of my time going to the filling station
|
The clue to the fallacy is the word 'investors'. A driver - assuming he wants to drive anywhere - is not an investor but a consumer, and a captive one if he's short of fuel and wants to drive today.
So why does it seem to work? I've done three models, each comparing buying 50 times at a fixed volume of 60 litres against a fixed spend of £60. One is at a steadily rising price, one at a steadily falling one, and the third at a price that fluctuates randomly. All result in a lower mean price per litre for the fixed spend.
But the idea ignores the extra fuel you have to buy - at a higher price - in a rising market to cover the same distance as if you'd bought by volume; and the missed opportunity to buy cheaper later in a falling market. The fluctuating markets come out about even, as you might expect.
I haven't allowed for another factor: that most of us buy enough to fill the tank, which limits our opportunity to buy when fuel is cheapest.
|
Surely the fallacy of the comparison with investment is that an investor generally has a target to spend a certain amount of money, but a driver's target is to get to work or wherever each day without running out of petrol?
If you set the initial value of fuel you need to buy, but then prices rise you will buy less. So at some point you won't have enough fuel to complete your trips. What do you do - buy an additional unscheduled load? Do you stick to your rule and only buy the same value, or do you buy a top-up couple of gallons?
It sounds crazy and unworkable to me. Unless of course you have a large reserve tank at home, and syphon off your "surplus" fuel each day and hoard it at last week's prices.
|
|
Works fine when the price is falling. If the price is steadily rising you will end up with not very much expensive fuel in your tank, whereas you could have had a full tank of cheaper fuel.
|
Intuitively, that might well work when fuel inflation and purchase frequency are relatively low in relation to the SD in fuel prices, which is probably the case.
If anybody has a year or two of weekly fuel price data it would be easy to Monte Carlo.
Last edited by: Manatee on Wed 21 Jan 15 at 18:18
|
The investor comparison is PANTS because the investor theory is based on regular savings over time: eg £50 a month..
As mentioned above, fuel buying is NOT investing: it's a need for a finite quantity of fuel based on usage...So higher prices = a greater spend .. (with investing, higher prices = buying fewer shares).
It will still work if the £ money amount is Large = near tank capacity so you don't fill up too often and your usage pattern is regular.
If irregular. who knows?
|
|
Martin, for some bizarre reason that me laugh and laugh.
|
My best tip is to get your 97yo Aunt to fill up (most of) the tank with Shell V power.
And the old girl loves going for a drive with the roof down in order to get her monies worth.
|
Fuelly tip puzzle - Mapmaker
