7 Ways to Save on Gas

That budget road trip you planned for the family this summer is starting to look a lot more expensive now that gas prices are on the rise.

Some of the spike is seasonal. Increased demand -- from all of those other families hitting the road -- tends to lift gas prices each summer, says Paul Hess, information analyst at the Energy Information Administration (EIA). Oil prices have also been creeping higher in recent weeks as optimism grows on Wall Street that demand for crude will rise worldwide once the global economy stabilizes, says Tom Kloza, chief information analyst at Oil Price Information Service, which monitors oil prices in North America. And further boosting prices at the pump is an Environmental Protection Agency requirement to add a fuel blend to gasoline in certain regions during the summer months that reduces ozone damage. This additive alone can add another five to 10 cents to the price per gallon, says Kloza.

As a result, regular unleaded gas costs $2.67 a gallon, up 16% from $2.30 a month ago, according to AAA’s Fuel Gauge Report. According to the EIA, gas prices won’t begin declining significantly until fall.

In the meantime, drivers can lessen the pain at the pump by taking some inexpensive and easy steps.

Here are seven ways to save on gas this summer.

Shop Around

Sure, it’s convenient to visit the gas station closest to home, but it may not be the best place to fill up.

To find the cheapest gas prices, compare prices at stations near your home or along your commute. Price-comparison web sites like GasBuddy.com and BillShrink.com let you plug in your daily destinations to find the most affordable gas stations on those roads. The price difference per gallon can be up to 50 cents, says Samir Kothari, co-founder of BillShrink.com.

Last summer, gas stations rolled out higher prices for consumers who paid with credit or debit cards (the idea was to pass along the merchant fees associated with such transactions). Many gas stations are still at it, which means those who pay in cash can often save. ARCO (a subsidiary of BP) stations, located in California, Washington, Oregon, Arizona and Nevada, for example, only accept cash and charge between five and 10 cents per gallon less than competing stations. (ARCO recently introduced a debit MasterCard which consumers can use to purchase gas at no extra charge. Other debit cards are accepted at these stations, but there’s a 45-cent fee.)

Cash discounts are popular in California, Connecticut, Florida, Michigan, New Jersey and New York, according to GasBuddy.com. (Discounts for cash-paying customers are legal in every state, as long as the gas station makes it clear that prices are different when you pay in cash vs. credit or debit, says Jason Toews, cofounder of GasBuddy.com.)

Fill Up at the Warehouse Club

In addition to frozen food, toiletries and appliances, Costco, BJ’s and Sam’s Club sell discounted gas at some of their locations.

“It depends on local market conditions but usually they sell it cheaply enough so that they’re beating out the competition,” says Toews. For example, at a BJ’s location in York, Pa., regular unleaded gas is selling for $2.59 a gallon. Local competitors there sell gas for $2.61 to $2.65 a gallon, according to GasBuddy.com.

Keep Your Car in Good Shape

Routine maintenance on your car’s tires and engine can increase its fuel efficiency (and even exptend its life). Plus, most of the things you need to do to maintain your car's health don’t even require pricey visits to the mechanic.

Just keeping your tires properly inflated can help save you cash. Underinflated tires require more energy to roll and decrease a car’s fuel efficiency, says Kothari. Driving with properly-inflated tires can improve fuel economy by 3% over a year, saving 20 gallons of gasoline and up to $45 annually, according to the Alliance to Save Energy. Check your car owner's manual to find out what the proper air pressure.

Also, be sure to regularly change your air filter. Clogged air filters can damage your engine and decrease fuel efficiency. A new air filter will improve gas mileage by 10%, according to the Department of Energy (DOE). Even better: Air filters are fairly cheap, ranging in price from $20 to $60.

Also, stick to the motor oil that’s recommended by your car's manufacturer, and buy one that states “energy-conserving” on the label, says Kateri Callahan, president of the Alliance to Save Energy. This can increase fuel efficiency by up to 2%, according to the Alliance to Save Energy.

Avoid Road Rage

Aggressive driving isn’t just dangerous. It also wastes a lot of fuel.

Consumers pay an extra 24 cents per gallon for every five miles per hour (mph) over 60 mph they drive, according to the Alliance to Save Energy. Rapid acceleration, hard braking and speeding can lower a car’s gas mileage by 33% on the highway and 5% in the city, according to the Department of Energy (DOE).

Clean Out the Clutter

Golf clubs, bowling balls or that bag of salt from last winter -- any unnecessary equipment or baggage in a car can decrease its fuel efficiency. According to the DOE, gas mileage decreases by up to 2% for every 100 pounds.

Another helpful tip: On your next road trip, try to pack everything inside the car rather than piling it on the roof. Stashing stuff on top of the car increases drag and decreases fuel economy by 5% or more, according to the DOE.

Limit A/C Use

Whenever possible try to keep the air conditioner at the lowest level. Having it maxed out can reduce your fuel efficiency by up to 25% compared to having the A/C turned off, according to the Alliance to Save Energy.

smart money

No empty threat

Credit-default swaps are pitting firms against their own creditors.

SIX FLAGS, an American theme-park operator, filed for Chapter 11 bankruptcy protection on June 13th, bringing its long ride to reduce debt obligations to an abrupt halt. The surprise was that bondholders, not the tepid credit markets, stymied the restructuring effort. Bankruptcy codes assume that creditors always attempt to keep solvent firms out of bankruptcy. Six Flags and others are finding that financial innovation has undermined that premise.

Pragmatic lenders who hedged their economic exposure through credit-default swaps (CDSs), a type of insurance against default, can often make higher returns from CDS payouts than from out-of-court restructuring plans. In the case of Six Flags, fingers are pointing at a Fidelity mutual fund for turning down an offer that would have granted unsecured creditors an 85% equity stake. Mike Simonton, an analyst at Fitch, a ratings agency, calculates that uninsured bondholders will receive less than 10% of the equity now that Six Flags has filed for protection.

Some investors take an even more predatory approach. By purchasing a material amount of a firm’s debt in conjunction with a disproportionately large number of CDS contracts, rapacious lenders (mostly hedge funds) can render bankruptcy more attractive than solvency.

Henry Hu of the University of Texas calls this phenomenon the “empty creditor” problem. About two years ago Mr Hu began noticing odd behaviour in bankruptcy proceedings—one bemused courtroom witnessed a junior creditor argue that the valuation placed on a firm was too high. With default rates climbing, he sees such perverse incentives as a looming threat to financial stability. Already the bankruptcies of AbitibiBowater, a paper manufacturer, and General Growth Properties, a property investor, in mid-April have been blamed on bondholders with unusual economic exposures. Some also suspect that CDS contracts played a role in General Motors’ filing earlier this month.

Solutions to the problem are, so far, purely theoretical. One option would be regulation requiring disclosure by investors of all credit-linked positions. There is now almost no disclosure of who owns derivatives on a company’s debt, leaving firms to guess how amenable creditors will be when approached with a restructuring plan. Longer-term solutions rest on an overhaul of the bankruptcy code and debt agreements to award votes and control based on net economic exposure, rather than the nominal amount of debt owned. Supporters of the market point to the value of CDSs in reducing the cost of capital and to plans for a central clearing house that will reduce redundancy and increase transparency. But the reform roller-coaster has not yet come to a halt.

economist

Obama puts critics of financial overhaul on notice

Obama to financial overhaul critics: `While I'm not spoiling for a fight, I'm ready for one'

President Barack Obama said Saturday that current financial rules exploit consumers and he put critics of his proposed overhaul on notice: "While I'm not spoiling for a fight, I'm ready for one."

Obama used his weekly radio and Internet address to defend his recent proposal, which is intended to prevent a repeat of the breakdown that has sent the U.S. economy reeling. But such major changes face a fight in Congress and opposition from some leaders in the banking and insurance industries.

In the address, Obama focused on a consumer watchdog office that he wants to set up.

"This is essential," Obama said. "For this crisis may have started on Wall Street. But its impacts have been felt by ordinary Americans who rely on credit cards, home loans and other financial instruments."

The Consumer Financial Protection Agency would take over oversight of mortgages, requiring that lenders give customers the option of "plain vanilla" plans with clear and affordable terms.

"It will have the power to set tough new rules so that companies compete by offering innovative products that consumers actually want and actually understand," Obama said. "Those ridiculous contracts -- pages of fine print that no one can figure out -- will be a thing of the past. You'll be able to compare products, with descriptions in plain language, to see what is best for you."

More broadly, Obama's changes would begin to reverse the easing on federal regulations pressed by President Ronald Reagan in the 1980s. Democratic leaders in Congress are promising legislation will get passed this year, but that depends in part on how Congress answers big questions about the overhaul, including the role of the Federal Reserve.

"I welcome a debate about how we can make sure our regulations work for businesses and consumers," Obama said. "But what I will not accept -- what I will vigorously oppose -- are those who do not argue in good faith."

By that, Obama said, he meant those who defend the status quo at any cost. He didn't name any people or organizations, but said special interests are already mobilizing to fight change. He called that typical Washington.

"These are the interests that have benefited from a system which allowed ordinary Americans to be exploited," Obama said. The president said he would stand up for his plans, saying: "While I'm not spoiling for a fight, I'm ready for one. The most important thing we can do to put this era of irresponsibility in the past is to take responsibility now."

White House: http://www.whitehouse.gov

The fear factor in health care costs

Industry watchers say the practice of 'defensive medicine' is a controversial and wasteful contributor to the nation's escalating cost of medical care.

Every time a doctor orders an extra test for you, it pushes up your medical costs and -- some experts say -- contributes to the waste in the nation's $2.2 trillion in health care spending.

While there's much debate about the actual dollar impact of this controversial practice called "defensive medicine," experts agree it's an obstacle to reining in the medical care expenses.

Defensive medicine occurs when a doctor orders tests or procedures not based on need but concern over liability, explained Dr. Alan Woodward, former president of the Massachusetts Medical Society (MMS) and vice chairman of its committee on professional liability.

"If you're serious about (health care) reform, you have to be serious about this issue," Woodward said. He estimates that more than 80% of doctors across the country are engaged in defensive medicine.

President Obama, who has so far made information technology a key to his plan to reform health care, addressed this issue Monday in his speech to the American Medical Association (AMA).

"Some doctors may feel the need to order more tests and treatments to avoid being legally vulnerable. That's a real issue," he said. "While I'm not advocating caps on malpractice awards, I do think we need to explore a range of ideas about how to put patient safety first, let doctors focus on practicing medicine, and encourage broader use of evidence-based guidelines."

"That's how we can scale back the excessive defensive medicine reinforcing our current system of more treatment rather than better care," he said.

A 2008 study from PricewaterhouseCoopers found that wasteful spending in the health system accounts for more than half of all of health care spending. The firm identified defensive medicine as the biggest area of excess.

Pricing fear: Still, the effects of defensive medicine aren't easy to quantify. Estimates vary vastly.

"Each doctor has a very different risk profile," said Dr. David Chin, managing partner of consulting firm PricewaterhouseCoopers' Global Healthcare Research Institute. "If one doctor asks for an additional test, it's not always because they are practicing defensive medicine."

The Congressional Budget Office, the federal agency that will calculate how much money health reform will cost or save, has estimated that medical malpractice costs -- which include defensive medicine -- amount to less than 2% of overall health care spending.

Chin said his guess is in line with the CBO's number.

Michael Morrisey, a professor of health economics and health insurance at the University of Alabama's Lister Hill Center for Health Policy, is also skeptical about defensive medicine's impact on health care costs. He said states that have capped malpractice claims haven't seen any significant decreases in health care costs or heath insurance premiums.

"To me, the three biggest challenges for health care reform are tax treatment of employer-sponsored insurance, retooling health care payment systems and technological advancement in health care," said Morrisey.

Woodward disagreed. He ranks defensive medicine as the second-biggest burden on health care costs after the fee-for-service model in which doctors are paid for the quantity, rather than the quality, of services provided.

Woodward estimates that defensive medicine accounts for about 10% of health care costs. Some industry studies have translated that to more than $100 billion in health care costs annually.

"We are driving the standard of care more and more in the defensive direction," he said. "Physicians are practicing maximalist medicine rather than optimalist care.

Woodward defines optimalist care as everyone getting high-quality care, when they need it, in a cost-effective way.

He said the uninsured are getting "minimalist" care while insured Americans are getting maximalist care, or more than what they need from doctors due to fear of liability, the fee-for-service payment model and direct-to-consumer advertising.

Consumer impact: Redundant tests can pump up premiums for the insured. "Consumers' premiums could be 10% lower if doctors stopped this practice," Woodward said.

From a medical standpoint, excessive tests can also be harmful to patients if errors or complications occur, said Dr. Manish Sethi, a member of the MMS' board of trustees and co-author of a 2008 study that investigates and quantifies defensive practices in Massachusetts.

The MMS surveyed more than 830 physicians across eight specialty areas in the state and found 83% reported practicing defensive medicine at an estimated cost of $1.4 billion per year.

"The bottom line is doctors across the country are ordering more tests because of liability concerns," said Sethi. "I am not advocating liability reform but we could look at other options."

The American Medical Association, the group representing doctors, last month mentioned "health courts" as one option.

"Let's have special courts for patients just like bankruptcy court or patents courts and judges have medical training," said Woodward. "In the current system, medical cases are heard by judges who may not be trained in health care. Jurors have no background in health care and jury awards are huge."

Sethi offered other ideas such as a national standard of care, enforced by the Department of Health and Human Services, mandating specific clinical practice guidelines for doctors.

Sethi feels this would mitigate some of the liability concerns and encourage more doctors to accept high-risk patients, countering another aspect of defensive medicine.

In Massachusetts, lawmakers are also considering a bill allowing doctors to apologize to patients and their families for a medical error. However, that apology wouldn't be admissible in court during any future lawsuit brought by the patient.

"What a patient wants when errors happen is full disclosure, an apology and assurance that it won't happen again and compensation," said Woodward, adding that this process can help prevent complaints ultimately going to court.

"We have to move from a reactive to a proactive health care system. I think Obama gets it, but I don't know how aggressive he will be about it," he added.

Cnn money

An EU fudge on bank reform

European Union leaders avoided a row over bank regulation—but only by being ambiguous.

TWO DAYS after Barack Obama announced what he intends to be the biggest overhaul of American financial regulation since the Depression era, the European Union’s leaders, meeting in Brussels on June 18th and 19th, agreed that financial institutions in the 27-country block should be subject to common rules and overseen by new EU-level supervisors able to make binding rulings in disputes between national regulators. The heads of national government also agreed to create a European Systemic Risk Board, charged with providing early warning of potential threats to financial stability. The French president, Nicolas Sarkozy, hailed Britain’s agreement to the plan as a “complete change in Anglo-Saxon strategy” on financial regulation. But was it? The British prime minister, Gordon Brown, insisted he had conceded nothing.

The 27 national leaders offered unanimous backing for the creation of a trio of EU supervisory authorities to watch over the banking, insurance and securities sectors. These would have the power to resolve clashes between national supervisors in financial firms’ home and host countries, and to decree that national supervisors were flouting EU rules. At the moment, multinational banks and other financial institutions are watched over by a patchwork of national bodies, with no clear mechanisms for resolving disputes.

Within the EU, France and Germany have been in the forefront of calling for ambitious European regulation of financial markets. That has raised alarm in the City of London, which is by far the largest financial centre in Europe. Earlier this month, Lord Myners, a government minister with responsibility for the City, told a House of Commons committee that Britain opposed an EU-level supervision, “because national governments are the only bodies capable of providing any fiscal support to firms.”

The idea of a clash of wills among Europe’s biggest powers was reinforced shortly before the summit, when Mr Sarkozy gave a speech pledging to rein in a global financial system “rendered mad by a total absence of regulation”. In the event, the summit passed off without public clashes, and Mr Brown secured a guarantee that national governments, and not the new European supervisors, will have a final say when it comes to decisions that involve taxpayers' money, such as calls to bail out failing banks. The new pan-European supervisors would improve the quality of cross-border supervision, Mr Brown said. However, he added: “I have ensured that the British taxpayer will be fully protected on this.”

Britain led the charge to secure language that EU supervisors’ decisions “should not impinge in any way on the fiscal responsibilities” of member nations of the union. But in truth other countries were hiding their own doubts behind British objections, as Mr Sarkozy himself acknowledged. Germany’s chancellor, Angela Merkel, was also “concerned” about the idea of regulators at the European level having responsibility over decisions that would have to be paid for at the national level, he said.

How this guarantee will be squared with the principle of EU-level supervision remains to be seen, senior officials admitted. The wrangling can be expected to resume again when the laws and directives to implement the EU leaders’ agreement are drafted by the European Commission later this year.

Ambiguity also surrounded the method that will be used to choose the head of the new systemic-risk council. Britain argued against a proposal from the European Commission that the council should at all times be headed by the president of the European Central Bank (ECB). As one of 11 EU countries that does not use the euro, Britain wields limited influence in the ECB. In the end, EU leaders decided that the chairman of the new systemic-risk watchdog would be elected by central-bank governors from all 27 EU countries; although as the French president unhelpfully noted, this was not much of a concession, since euro-zone countries hold a permanent majority within the union.

More broadly, senior politicians and officials were at pains to defend Europe from charges of falling behind America, when it comes to crafting new regulations for the financial system. Mr Obama’s reforms were in fact “much inspired” by European plans, insisted a senior EU official, speaking off-the-record, citing the example of a systemic-risk council, which was first mooted in Europe. Moreover, it was easier for America to move quickly, as it was a single federal country, with one president, one treasury and one central bank. Europe had “28 central banks”, said the Eurocrat, counting the national banks and the ECB.

The battles are not over. Further EU legislation is coming on hedge funds, executive pay and other issues that have become favoured talking points for European politicians keen to blame the crisis on “Anglo-Saxon” excesses. As Mr Sarkozy said, with apparent relish, at the summit’s end, the measures agreed so far were only a starting point, and would doubtless “evolve”.

economist