Why do Fuel Prices Vary: Explained Simply, With the Maths Shown and the Caveats Stated

Why do fuel prices vary is one of those questions that sounds simple until you try to answer it for your own car. The answer depends on the car, the conditions and how you drive, so there is no single figure that fits every driver. What this page does instead is give you the method, so you can work out your own answer and know exactly what it means.

The sections below take the question in order: the explanation first, then the step-by-step method, then the things that can go wrong and the signs that it is time to see a professional. Every number that depends on a place or a rule states the jurisdiction it applies to, because limits change and a figure that is right in one country can be wrong in another. That is the point this page works through for why do fuel prices vary.

What you need to know first — why do fuel prices vary

On this page, why do fuel prices vary is the case in point: The cost of driving per mile is not one number but a stack of numbers: fuel, tyres, servicing, insurance, depreciation and tax all contribute, and each one is worked out differently. Fuel cost per mile is the fuel price divided by the MPG; tyre cost per mile is the tyre price divided by the expected mileage; servicing and insurance are annual costs divided by annual miles. Add the parts together and you have a total cost per mile, but only if every part uses the same mileage and the same stated assumptions.

The useful thing about why do fuel prices vary is that it can be checked with tools most drivers already own: a gauge, a tread-depth measure and the handbook for the car.

How it works in practice — why do fuel prices vary

The part most drivers get wrong is depreciation, because it is the largest cost and the one that never appears on a receipt. A car loses value every year whether it is driven or not, and the loss per mile falls as the annual mileage rises, because the same annual loss is spread over more miles. That is why a low-mileage driver can have a higher cost per mile than a high-mileage driver in the same car, even though the low-mileage driver spends less in total. That is the point this page works through for why do fuel prices vary.

Worked example — why do fuel prices vary

Take a driver covering 16,000 miles a year as an example figure. The method on this page works the same at any mileage, so the example is there to show the arithmetic, not to state a fact about your car. Start with the measurement or the figure you can check yourself — a gauge reading, a tread-depth reading, or the figure on the placard — and write it down before you do anything else. Then apply the method step by step, checking each result against the one before it, because an error early in the chain is the one that is hardest to spot later. If the result surprises you, check the inputs first: a pressure read on warm tyres, a tread depth measured in one spot only, or a figure taken from the fitted tyre instead of the placard will each give a wrong answer that looks plausible. That is why the worked example on this page states its assumptions openly, and why you should do the same with your own figures. That is the point this page works through for why do fuel prices vary.

What changes the answer — why do fuel prices vary

On this page, why do fuel prices vary is the case in point: Comparing driving with flying, or one car with another, only works if the comparison is like-for-like. A drive-or-fly comparison has to count the fuel and tolls for the car against the fare, the airport parking and the travel to the airport for the flight, and it has to count the time honestly as well. A car-to-car comparison has to use the same annual mileage, the same fuel price and the same assumptions about servicing and depreciation, or the answer says more about the assumptions than about the cars.

  • For why do fuel prices vary, the point is this: Fuel: price per gallon divided by MPG, the largest running cost for most drivers.
  • For why do fuel prices vary, the point is this: Tyres: price divided by expected mileage, a small cost per mile that adds up over a set of four.
  • On this page, why do fuel prices vary is the case in point: Servicing: the annual service and repair bill divided by the annual mileage.
  • On this page, why do fuel prices vary is the case in point: Insurance: the annual premium divided by the annual mileage, which falls as mileage rises.
  • For why do fuel prices vary, the point is this: Depreciation: the annual loss in value divided by the annual mileage, usually the largest single part.
  • On this page, why do fuel prices vary is the case in point: Tax and charges: annual tax, tolls and parking, counted honestly rather than forgotten.

Common mistakes — why do fuel prices vary

  • Counting fuel only and calling the result the cost of driving, while ignoring depreciation, insurance and servicing. That is the point this page works through for why do fuel prices vary.
  • On this page, why do fuel prices vary is the case in point: Using different mileages for different parts of the calculation, so the total does not add up.
  • Taking why do fuel prices vary as the case in point: Comparing a car with a flight on fare alone, without counting parking, transfers and the time involved.
  • On this page, why do fuel prices vary is the case in point: Using a single year's depreciation as if it were the same every year, when the loss is usually steepest early on.

Step by step — why do fuel prices vary

  1. For why do fuel prices vary, the point is this: Write down your annual mileage, because every part of the calculation divides by it.
  2. For why do fuel prices vary, the point is this: Work out the fuel cost per mile from the fuel price and your measured MPG.
  3. On this page, why do fuel prices vary is the case in point: Work out the tyre cost per mile from the price of a set and the expected mileage.
  4. Add the annual servicing, insurance and tax costs, and divide each by the annual mileage. That is the point this page works through for why do fuel prices vary.
  5. Taking why do fuel prices vary as the case in point: Estimate the annual depreciation from the car's value at the start and end of the year, and divide by the mileage.
  6. Taking why do fuel prices vary as the case in point: Add all the parts together for the total cost per mile, and note every assumption you used.

What can go wrong, and when to see a professional — why do fuel prices vary

Most problems with why do fuel prices vary announce themselves early if you know what to look for: uneven wear, a vibration that was not there before, a warning light, a noise that changes with speed, or a reading that does not match the placard. None of these is a reason to panic, and all of them are reasons to check the basics first — pressures with a gauge when the tyres are cold, tread depth across the whole tread, and the figures on the placard rather than the ones on the fitted tyre. If the basics are right and the symptom is still there, or if you find a bulge, a deep cut, a cracked sidewall or a tyre that is losing pressure quickly, that is the point to see a tyre professional rather than to keep driving and hoping. A professional can see the inside of a tyre, measure the alignment angles and test the sensors, and those are the checks that cannot be done from the driveway. The cost of an inspection is small beside the cost of a tyre worn out early or a problem found too late.

Related guides — why do fuel prices vary

Frequently asked questions

Does driving more miles make each mile cheaper?

For why do fuel prices vary, for the fixed costs, yes: insurance, tax and depreciation are spread over more miles, so the cost per mile falls. Fuel and tyre costs per mile stay roughly the same whatever the mileage. That is why high-mileage drivers see a lower total cost per mile even though they spend more in total.

How do I calculate the cost per mile of driving?

For why do fuel prices vary, add up the parts: fuel cost per mile is the fuel price divided by MPG, tyre cost per mile is the tyre price divided by expected mileage, and servicing, insurance and tax are annual costs divided by annual miles. Add depreciation the same way. Use one annual mileage for every part and state your assumptions.

How much does driving cost per mile in total?

For why do fuel prices vary, there is no single figure, because fuel, depreciation, insurance and servicing differ by car and by driver. Work the parts out for your own car with your own prices and mileage, using the method on this page. Fuel alone is usually only part of the total, and depreciation is often the largest part.

Is it cheaper to drive or fly?

For why do fuel prices vary, it depends on the distance, the number of passengers, the fuel price and the fare. Count the full cost of each side: fuel and tolls for the car, and fare, parking and transfers for the flight. A car usually wins for short trips and for several passengers; a flight usually wins for long distances and one passenger.

What is included in the total cost of car ownership?

For why do fuel prices vary, purchase price or finance, depreciation, fuel, insurance, servicing and repairs, tyres, tax, and any tolls or parking. The running-cost parts are the ones you pay regularly; depreciation is the part you only see when you sell. A full comparison counts all of them with stated assumptions.