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Why do we get so fired up over the price of gas? Add to ...

I know people who spend more on coffee than they do at the pumps, yet those ever-changing gas prices really get them percolating.

There is relative silence when it comes to, say, the price of bottled water, which trumps both high-octane fuel and high-octane java. So why do we get so cramped up about gas?

I started driving when I was 16 and I clearly remember paying 49.9 cents per litre of regular gas. Back then, I drank some horrific coffee at a local coffee shop and could pay for it with three quarters for a small cup. That was 1993. Eighteen years later, the price of regular gas is $1.20 per a litre (in Toronto) – a 140-per-cent increase. I’m drinking better coffee, but the price has not quite doubled (which may surprise those who are used to spending a few dollars for a fancy caffeine fix). There are signs, however, that this spring coffee is heading up too. So, based on my own experience, gas has increased more in price than coffee. Good thing there is no “peak coffee bean” theory.

But that is only part of the story.

Imagine if your morning coffee costs more than a coffee at the end of the day. Imagine if the price also spiked more right before you really needed it on Monday mornings. If there were a particular season for drinking coffee, like the summer driving season for cars, how would you feel if there were a prolonged increase in prices in anticipation?

And here’s the kicker. What if coffee shops posted the price of a standardized small cup of coffee on giant signs on the street corners for all to see? What if the prices changed every few hours, and what if better deals were available in different neighbourhoods?

Well, even if that were the way coffee is sold, I imagine we still wouldn’t raise as much of a stink as we do with gas. There are two main reasons I think: The price of a cup of coffee doesn’t wildly bounce from $1.10 to $2.20 and back down to $1.10 within the span of a year; and while coffee consumption is a choice, gas is a necessity.

I imagine one could argue coffee is a necessity. However I’ll counter that by saying the addictive qualities of caffeine probably blunt our sensitivity to prices. So let’s just call that a wash.

You may be surprised to learn that the price of coffee futures has more than doubled in the past year. It hasn’t received as much media play as the price of oil, though. And we certainly don’t see the price of a cup of coffee changing on a daily basis.

So coffee futures experience wild price movements, yet the price of a cup of coffee remains stable and measurable over time. It makes you wonder why the same can’t hold true for gas prices. (The answer is gas speculators, but most people don’t know that.)

It doesn't help that occasionally we see a drop in gas prices right after we’ve filled up. It would be like walking out of the coffee shop and the server yelling at us that the next person in line saved 10 cents.

With ever-changing prices and constant reminders that we may not have gotten the best bang for our buck, it's easy to see why gas gets us more upset than coffee.



Preet Banerjee is a senior vice-president with Pro-Financial Asset Management. His website is wheredoesallmymoneygo.com.

Follow on Twitter: @preetbanerjee

 

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