Otaki is 16km away from Levin, and Levin has cheap fuel. Is it worth making the 16km return journey to score petrol at a significantly lower price?
This is one of those fiddly little calculations that I always wondered about but never could be bothered actually calculating. Thankfully, having a blog gives me the impetus to finally fulfill my life destiny and do so.
What I Exclude
To complete this calculation, I will exclude the time cost. I will assume that you are a gentleperson of leisure and that your time traveling to and from Levin 16km away is effectively worth nothing. (No offense.)
Naturally, because it is the way with economists, I will also exclude all of the myriad externalities of production and externalities of consumption associated with fuel. (Basically anything to do with carbon emissions will be neglected and excluded from this calculation.) I will also exclude other factors relevant to motor vehicles, such as wear and tear on the vehicle from the kilometres travelled.
The Price Difference
At the time of writing, and possibly due to a ‘surprise’ recent price hike across the country, the price of unleaded 91 petrol in Levin is $1.949 per litre at their cheapest station. In Otaki, meanwhile, the price is $2.019.
Calculate the Cost of Travelling That Distance
The Honda Jazz gets approximately 100 kilometres off 5.4 litres of petrol. This equates to 18.519 kilometres per litre, or 0.864 litres across 16 kilometres.
To calculate the cost of this, we multiply the quantity of litres consumed in the journey by the cost of petrol at the lower rate. This would come to (0.864 x $1.949) = $1.684. This is the cost of travelling 16 kilometres to score cheap petrol.
Factor in the Cost of the Return Trip
But don’t forget, you also need to make the journey “there and back again” as Bilbo Baggins would say. So take the figures in the above calculations and double them. The cost of the return trip would therefore cost $3.368. Note how all of my numbers, despite being in dollars and cents, are arbitrarily rounded to three significant figures.
Compare This With The Amount You Save On Fuel
Generally, when I refuel my tank, I fuel up about 25 litres to fill up. As one can imagine, I prefer to live on the safe side.
25 litres at $2.019 would cost $50.475. 25 litres at $1.949 would cost $48.725. This is a difference of $1.75 or around 3.59%.
So the saving is actually significantly less than the cost of the return trip – specifically, it’s $1.618 cheaper not to make the trip.
I guess the conclusion is pretty obvious. Unless you have a very empty tank or there’s an even more significant price difference (or the petrol station is on your way to somewhere else), it’s generally only worth going a few kilometres to get even a significant saving on petrol. But petrol stations within a few kilometres of one another will generally have very competitive pricing.
Of course, there are some “what ifs”. What if you have a large tank, use a different type of fuel, face traffic conditions or slopes getting to one station as opposed to the other? These circumstances may present extenuating circumstances that would affect the calculation.
The debate rages on.
