Still needing to hit the road this summer? Better hurry up! And you'll want to make sure that your car is gassed up and ready for the drive.
Americans planning to take a late-summer vacation by car can expect to find some of the cheapest August gasoline prices in four years, and they can do a few quick checks to ensure a trouble-free trip. At the same time, those who'll need a new vehicle for the journey will want to be alert to the risk of winding up with a car that was damaged in recent flash flooding. Those cars may look just fine and might even seem to run well, but you could find yourself with big problems in a matter of months.
In this week's podcast, Mark Hamrick, Bankrate's Washington bureau chief, interviews:
- Tom Kloza, chief analyst for GasBuddy, who has the lowdown on today's lower gas prices.
- Tara Baukus Mello, Bankrate's auto writer, who tells how to make sure your current car is road-ready and offers tips on how to spot a flooded car when it's time for your next set of wheels.
Also, Bankrate's Allison Ross shares some timely advice from teachers on how to get the best deals on back-to-school supplies.
Late-summer road trip essentials
We look at where gas prices are going and offer tips so you enjoy a reliable ride and avoid choosing a car that was in a flood.
From Bankrate.com, This is "Your Money This Week."
I'm Mark Hamrick in Washington.
For many Americans, these final weeks and days of summer present a challenge: The opportunity to try to extract a bit of relaxation and fun before the more serious days of fall hit.
We're going to do what we can to help you with that.
We'll begin with Tom Kloza, chief oil analyst with Gas Buddy. He'll explain why gasoline prices began the month of August at the lowest in four years. And he'll tell us what's ahead for prices at the pump.
In our second segment, Bankrate's Tara Baukus Mello, writes about all things automotive, and she has some useful tips for anyone getting ready to hit the open road. And there are also some words of caution: With severe flooding hitting some areas of the country recently, you'll hear about the risk some used cars for sale could have some hard-to-detect flood damage.
All of that and more coming up on "Your Money This Week."
As we record this, the national average for a gallon of gasoline stands below $3.50. That's down from a month ago and down from where gasoline stood a year ago. I asked Tom Kloza, chief oil analyst with Gas Buddy, what's going on?
Tom Kloza: Well what has been happening is that crude oil prices are down anywhere from $10 to $14 a barrel from where they peaked in June. A lot of speculators and a lot of investors and traders got all excited when there was violence in Iraq, and they chased prices higher, but essentially the market has spanked them with some pretty big losses. So it is well supplied, globally right now, the crude oil market. There is a little bit of a stunted growth, let us say, in emerging economies, and prices are fairly temperate.
Mark Hamrick: So Tom, typically looking ahead at the Labor Day and beyond, gasoline prices decline once the so-called summer driving season has passed. So should we expect that to happen further?
Tom Kloza: Yeah, I do think that we will see prices slide appreciably in the last 100 days of the year. Next couple of weeks or so, we may stay around $3.40. Actually, most people if they take any active role in purchasing gasoline can probably find it for about $3.25 to $3.40, unless they are in California and on the West Coast. And once we get to September 15th, for most of the country, the formula for gasoline or the recipe for it changes, and it is a lot easier to include some cheaper hydrocarbon components. So the government projects that we will see $3.30 when the market bottoms around December. I would suggest that we will see a lot of prices below $3.00, and the average price may go below $3.25, probably in October or November.
Mark Hamrick: Now a lot has been said about the nation's oil output. The Energy Department, which you just referenced there, thinks that output next year, 2015, will be the most since 1972 in the United States. What kind of role is that playing big picture?
Tom Kloza: That is playing a big role. And actually when the market initially got excited about Iraq and chased prices up to about $114 globally, there really was not a recognition that we are now producing in the United States about 3 million barrels a day more crude than we were during the first Arab Spring. So that really has created a kind of what I would call "insulation nation" here. We are not dependent on Mideastern crude. We are dependent on North American crude, supplemented our own from, let us say, Canada and Mexico. But there are a lot of choices. And production is going to rise, I think, by the end of this decade. It is a question of how far above 10 million barrels a day we are going to see. And we are probably looking at flat to slightly lower demand. So we are in a pretty good position at the moment.
Mark Hamrick: And what is the mix of our consumption in the United States when it comes to crude oil, of the crude that we are producing ourselves as Americans or as a country versus the crude that we are still importing, and yet we are exporting some crude as well. Kind of sort that out for us a little bit.
Tom Kloza: Well, we now import less than we produce, and that ratio is going to change. I would say we are producing about 8.5, and ostensibly we are using all of it here. We are not exporting it. And we are importing perhaps about 7 million barrels a day. That number is going to drop. It is going to drop to maybe 5 or 6 million barrels a day. We will still import crude, but mostly from Canada, where it will be north of 2 million barrels a day, and Mexico and let us say from some countries that are not particularly hostile. So we do not have that fear of having to import from countries that are opposed to us in ideology.
Mark Hamrick: Speaking of ideology, you know I am centered here in Washington and obviously not the most productive place on the face of the planet with the sort of polarization of our political parties and processes in recent times. Sometimes you will hear a criticism that the administration lacks an energy plan. I am wondering: The market seems to be sorting this out, nevertheless. I am wondering what you think of that notion or that criticism and whether politicians ought to get more involved in, I guess, kind of sorting out the energy production process in our country.
Tom Kloza: If I were looking at the politics, I would probably look at ex-Fed Governor/ Chairman Bernanke. By having very, very low interest rates, we have an interesting situation. It generally proppped up the price of crude oil worldwide. One could argue that easy money means that $100 a barrel is not kind of an obscene number for crude. It has also meant a lot more people changing vehicles and getting in those more efficient vehicles. But the high price of close to $100 or even a little bit south of that, has basically made it so that the producers could make some money by finding oil in places like North Dakota, the Rockies, West Texas, where some of the fields were thought to already have been exploited. And that is going to continue through the rest of this century. So I could not look at any one politician that is responsible for this, but it is the combination of high prices, certainly higher than what we grew up with a generation ago, and very, very wonderful technology in the United States.
Mark Hamrick: Well, it really is a dynamic time for energy and technology. I think sometimes it is underappreciated by a lot of people just how much has been happening, and it is great to be able to speak to you, Tom, to shed some light on all this. Thank you so much for your time.
Tom Kloza: That is quite OK. Thanks, Mark.
Mark Hamrick: Tom Kloza. He's chief oil analyst with Gas Buddy. He spoke with me over the phone from New Jersey.
The summer travel season has one last gasp before heading into Labor Day.
At Bankrate, there's no one more dialed in on the auto world than Tara Baukus Mello.
She has some suggestions on how to make sure your vehicle is ready for a road trip, and how to save.
Tara Baukus Mello: Fuel costs can be a significant cost of a road trip. My family and I, we are big road trippers and we try to take a long road trip vacation every year. So not only do I write about this, but it has been a favorite hobby, I guess you could say, of mine.
Before you head out on the road, you want to do sort of a basic car check, particularly if you are driving an older car, as many Americans are these days. So bring the car into your mechanic and have him do a once-over. You can also do it yourself. You are looking for things like: Are the hoses and belts cracked, is there visible wear under the hood on those items? Is your air conditioning system operating at its optimum temperature? Is it getting cold enough? How is your cooling system doing? One of the big very minor issues is the cooling system gets exposed to high temperatures in the summer when you are driving, and you have the rubber gasket on your radiator cap that is cracked. And as a result your car overheats. So a few dollars buying a new radiator cap can make the big difference in a road trip. So go ahead and do a few checks yourself. Bring the car to a mechanic and have them do a quick once-over before you head out.
Tire pressure is also something really important all the time. You should be checking your tire pressure once a month. But before you head out, make sure you are checking your tire pressure and you have got the correct pressure. So that would be what is listed on your driver's side doorjamb or in your owner's manual. Your tires are probably low on air. You are probably going to need to add some. You can do that with an air compressor at the gas station or if you have got one at home.
Mark Hamrick: Yeah, a lot of these things do not necessarily require a lot of expenditure. It is more like making sure you have a good diet rather than have to go to the hospital for a heart attack having not made good decisions in the past.
Tara Baukus Mello: Yeah, exactly. There is nothing worse than being stuck on the side of the road on your vacation waiting for a tow truck because you overheated or you blew a tire because your tires were too low and they heated up while you were driving. Something like that.
You just mentioned fuel costs a moment ago, and one of the tips that I wanted to give folks is it is kind of hard to calculate what it is going to cost you for your fuel costs if you are going on a longer road trip. You are probably going through lots of different cities, potentially different states, and gas prices vary widely. The feds have a great website, fueleconomy.gov, and there is something there called the "My Trip Calculator." And the site will automatically use your EPA-estimated fuel economy for the cars that you enter. But you can also customize it if you want, if you know your fuel economy is different. And it will tell you what your projected costs are.
Mark Hamrick: That is terrific advice, and there is so much technology out there that was not available a few years ago. In our first segment, we heard from Tom Kloza with Gas Buddy, and they have apps and a website that provides a lot of this information. And, of course, Bankrate.com has all kinds of auto-related calculators. Not necessarily related to trips, but if you are in the business of looking to purchase a car, those are out there.
Let us take a look at an issue that is not quite so upbeat, but one that has serious repercussions, and that is the fact that many areas across the country have been experiencing weather extremes, and that includes flooding. And this presents a problem for car owners that are immediately affected where there cars have been damaged or flooded out. I know you have been looking at this. First of all, if one experiences this, is it true that a car would be ruined if it is in fairly deep water?
Tara Baukus Mello: You know, it is shocking how little water needs to get into a vehicle for it to have significant problems. Certainly if you have got water that has come up high enough to enter your vehicle, it is likely to have major problems, and what is kind of scary about that is that it may not be obvious right away. You may say, "Well, the car is running fine. OK, it is kind of damp but the electronics are working. The vehicle is running the way I would expect it to be running." And that can create an issue with the insurance company, because it can seem like there is not an issue. And months later, as the electronics start to dry out, there can be issues with the computer systems that control the vehicle in terms of the actual fuel exchange and what have you in the vehicle when you are driving. Also, the electronics that do things like lock the doors or put up the windows, those kinds of things as well. So it is really something to watch out for and make sure, if you have experienced this, that you deal with somebody who can really tell if there are any problems. And make sure that you are reporting them to your insurance company, even down the road. Because things that do not necessarily seem to be related can actually be related to that flood damage.
Mark Hamrick: And I can imagine, then, that it probably affects the car's value. Tell me about that.
Tara Baukus Mello: It sure does. The folks who look at car valuation data, they are kind of all over the map. The minimum amount that they say it is going to affect a car's value is 20 percent. The highest amount is up to 70 percent. And it shows a lot to do with how popular the car is in general and how rare it is, if it is something that is coveted, that kind of thing. But it is definitely going to affect your value. And even at 20 percent that is pretty significant.
Mark Hamrick: So then there is the other part of all this for people who are in the market for a car and I guess in this instance, we are really talking about a used car. Do people all over need to be worried about essentially potentially being sold a flood-damaged car?
Tara Baukus Mello: They sure do. They certainly need to be wary across the country. We have seen it with several of the large hurricanes that have come through in recent years. Typically, with the hurricanes that come through, you are talking about half a million cars or more that are affected by flood damage. And because of the drop in value, sometimes the owners of those cars, they end up going off to middlemen who essentially do something called title-washing to hide the flood damage. So it goes through a couple of different titles and a couple of different states. Ends up often on the other side of the country as a clean-titled car being sold for what the value should be without the flood damage. So it is definitely an issue no matter where you are in the country.
Mark Hamrick: Well then the last question with all that I guess would be if one is a consumer, a potential car buyer, what can we do to try to guard against being sold a vehicle like that, particularly if the dealer does not seem to know?
Tara Baukus Mello: Well the first thing you want to do, as you would want to do with any car that you are purchasing, is check the car's history through a VIN-checking service. There is a free service called VIN Check, which is maintained through the National Insurance Crime Bureau, and that notes cars with flood damage that have been stolen, salvaged titles, those sorts of things. There are also other services for pay that you can do. And you are getting your vehicle history report. So that is going to help. Sometimes car dealers provide that for free, but that is not foolproof. So you really also want to look at the car itself and look for signs of flood damage. For example, flood-damaged cars even that have been dried out, smells kind of musty or moldy, especially when you turn on the fans for the climate control system. So if you notice that, that is something to pay attention to. Look for small bits of debris or dirt in odd places, like high up on the carpet in the foot wells. Or if you are moving the seats back and forth, sometimes the seat rails will have a kind of a funny sound to them because there is dirt stuck in them. Sometimes inside the engine compartment, there is a dark line that shows where the water line was in the car, but you do not necessarily notice that unless you have a bright flashlight and you are kind of looking under the hood.
Mark Hamrick: Wow, you just literally sent a chill down my spine just thinking about what that must look like, but it is great advice and a lot of detail there I would have never thought of. Well, whether we have the pleasure of taking a trip this fall or the work that is done to make sure we do not get a problem with essentially a flooded car that is a lemon, a lot of great advice today, Tara. Thanks so much for your time.
Tara Baukus Mello: Thanks so much. Have a great day.
Mark Hamrick: Tara Baukus Mello, who covers autos for Bankrate. She spoke with us from her office in Los Angeles. And for more information on owning and buying a car, check out Bankrate.com.
One follows from another: The end of summer means the beginning of back-to-school.
Bankrate's Allison Ross got some school supply savings tips from teachers.
Allison Ross: The yellow school buses are back in your neighborhood, and that means time to buy school supplies. But back-to-school shopping doesn't have to drain your wallet.
The average family with school-age kids has only finished about half of its back-to-school shopping by now, according to a survey by the National Retail Federation. If you are one of those families, fear not: Bankrate has tips from real teachers on how to pare down those shopping lists.
First, make a plan and differentiate between "needs" and "wants." Remember that less is sometimes more. The eight or 16-pack of crayons may be more practical than the deluxe 64-pack, since young kids often end up sharing their crayons in class.
Watch for sales or tax-free shopping days. And don't bother paying sticker price for books; look instead for cheaper e-books or rummage through used book stores.
It's also a good idea to hold onto a bit of cash for things you may find your child needs that was not originally on the list.
For more personal finance tips, visit Bankrate.com. I'm Allison Ross.
This week in business history...
August 26, 1939. In case being taken out to the ballgame wasn't an option. The first television broadcast of major league baseball took place on a New York station.
It was a double header between the Cincinnati Reds and the Brooklyn Dodgers. Not many people owned TV sets at the end of the 30's.
Networks or cable channels now pay hundreds of millions of dollars a year for the TV rights for Major League Baseball.
You've been listening to "Your Money This Week."
For more on this and other personal finance issues, visit Bankrate.com. Thanks to producers Lucas Wysocki and Amanda Rowe for their work in the studio and also to editor Doug Whiteman.
I'm Mark Hamrick. From all of us here at Bankrate, here's hoping you have a great week.