Money Sunday: Dealing with High Oil Prices

In between the deaths of Terri Schiavo's body and Pope John Paul II, oil surged to a new record high price. Unfortunately the U.S. economy is perhaps more dependent on oil prices than ever, and what affects the national economy can profoundly affect its citizens, including Kossians.

Rising oil prices are simply a specific manifestation of inflation. And, if you understand that, you're halfway toward understanding what you can do to deal with rising energy costs. Remember also that many so-called financial experts focus only on the revenue (income) side of the equation and rarely on the outflow (expenses) side. Both sides of the equation are equally viable. Here are some practical tips (in no particular order) — and please feel free to add your own:

-- Reassess and rationalize your direct energy consuming activities....

Do you really need an SUV to lug groceries, or would a station wagon do? Far too many Americans buy bigger vehicles than they really need. Ask yourself if you could afford to operate your vehicle(s) if gasoline prices doubled tomorrow — a now realistic prospect. Here are some specific gasoline-saving tips:

1. For the one or two trips per year that you take to the outback, why not rent a vehicle? You won't feel so bad about driving over rocks and across rivers, and you'll save lots of money. Choose a vehicle that satisfies the majority of the driving that you do, not the once-a-year fantasy. And choose the base engine: it's plenty.

2. Invest in car safety (side airbags, defensive driving courses, Consumer Reports-endorsed child safety seats, etc.) rather than heft. SUVs are prone to rollover; cars still provide greater safety.

3. If you have to lug cargo around occasionally, invest in a quick-release, reliable cargo container atop a more fuel efficient vehicle. Be sure to follow manufacturer and vehicle advice about loading.

4. Learn to drive manual transmission. Manual transmission costs less to buy and operate. (Learn how as you take that defensive driving course.)

5. Take public transportation. We all know that, but do it. Don't have any? Agigate for some. Bring along some work. In the age of cell phones and notebook computers, you can get a lot done, safely, as somebody else drives. Ask your employer to pay a portion of your salary in tax-exempt public transportation fares. (It's true. Your employer can pay for your public transit commuting costs and you won't pay taxes on that amount.)

6. Rediscover your bicycle. I should note that I've paid for my bicycle because of the gasoline and bus/train fare savings. And it pays health dividends, too. Please be sure to wear bright clothing — an orange vest does nicely — a helmet, lights, and reflectors. My favorite option is a quality folding bicycle, such as the Brompton.

7. Rediscover your shoes. Did you know that you can actually walk 3/4 mile to the grocery store? Really, it's true. Honest. Bring a backpack or rolling cart. Don the iPod and go for a walk. (I did all my shopping yesterday on foot.) Bonus points if you choose to live some place where you can actually walk to stores. (If you don't, move. And I'm only half joking. Density is good.)

8. If you must drive, stick to the speed limit and (if safe) use the cruise control. Fill up on regular unleaded (or diesel). Think for half a second about where and why you're going, and make multiple stops along the way. ("If I'm out anyway, I'll also stop there...") Bring a friend or family member. (If you both need to shop, why not make it a social outing?)

-- Replace every lightbulb (you can) in your home with compact fluorescent (CF) lightbulbs. This one's a no-brainer. The bulbs pay for themselves in electric bill savings, and they last longer. Keep an eye for sales at your favorite home improvement megastore or corner hardware store.

-- Make sure your (well diversified) investment portfolio includes some element of inflation protection.  Last time "Money Sunday" talked about I-Bonds as a good hedge against inflation, and you can read more in "Declining Dollar, What to Do."

-- Stock up on oil-related products that have not yet risen in price. There are a (very) few such products. A good example is airline travel. Fares are still ridiculously low. If you have some travel planned for, say, Thanksgiving, maybe now is the time to buy your tickets.

OK, those ideas should be enough to get started this Sunday. Do you have any more ideas for dealing with high oil prices?