The Price of Petrol

I know that the price of petrol is on the up again. How come, given the header to this posting? It’s because every time the price of fuel goes up, I get a media request for a comment. Which is a bit ironic: being carfree, I have absolutely no interest in the price of petrol - petrol prices are just one more thing that I don’t have to worry about. But I am interested in why most of us are so interested. Just why do car owners get so excited about the price of petrol? You’re probably thinking that the answer is obvious. But the actual answer is probably different from the one you’re thinking of, and behavioural economics can tell us why. Thinking about the cost of owning and running a car, means we should think about significance – the things that really matter.

What we actually think about is salience – the things that we think matter. When it comes to costs, the things that really matter are the cost of buying the car and the subsequent depreciation it undergoes, the cost of insurance, membership of rescue organisations, annual parking fees etc. These are the big ticket items that cost the most money. Often, they are paid annually, or by direct debit, so they are not that obvious to us. Some we don’t even notice – like depreciation. But the thing that we do notice, because it is most salient, is the cost of petrol – the pain we suffer each time we splash out to top up the tank. It happens quite frequently and it is very noticeable, especially if we pay cash. Of course, what makes the price of petrol even more salient, even more top of mind, is all the media interest it attracts. Which I guess is where I started…..