For the past several years, prices at the pump have remained high and, for many companies, gasoline has been a big expenditure. However, prices have been coming down and are expected to be lower in the coming year (some are even predicting an oil glut). For businesses that entail a substantial amount of driving, the cost savings from lower gasoline prices can really mount up. What are you going to do with these cost savings?
Determine your cost savings
How much did your business spend on gasoline in 2012 and 2013? Let's take this case: a self-employed person drives 20,000 miles a year on business. The cost may have been $2,800 for gas (assuming the vehicle got 25 miles per gallon and the price was $3.50 per gallon). If the price drops to $3.00 per gallon, that's a $400 savings per year.
Businesses that do a lot of deliveries or driving to see customers and clients may reap significant savings, depending on where they are based (which impacts the price at the pump).
Ideas for spending the savings
If your budget had included an allocation for gasoline at previous prices, you may want to apply the savings to:
- Health care costs. These costs are going to be higher in 2014 for most businesses and self-employed individuals. Watch for developments with respect to Obamacare to see whether any relief will be provided.
- New equipment. You can use the savings to buy new items needed for your business, such as tablets and other mobile devices. Check on tax breaks for these purposes that can effectively boost your buying power (by way of the tax savings realized).
- Marketing. Businesses are always looking for ways to find new marketing dollars. Consider applying the savings toward social media activities to promote your business.
How do lower gasoline prices impact your decision about which vehicle to buy or lease? It still makes sense to factor in fuel economy.
Starting in 2015, Oregon will have drivers track their mileage using a black box and pay a tax based on this mileage, or pay a flat fee. This new tax is blind to fuel economy. It is likely to be challenged in the courts, but if the state wins, other states could follow suit.