Dollar cost averaging is an investment method used to reduce exposure to risk associated with making a single large purchase. You buy a fixed amount of shares at regular intervals. This means that you buy more shares when the price is low and less shares when the price is high. While not being as profitable as buying all your shares when the price is low it reduces the risk of having bought all of your shares when the price was high.
Though dollar cost averaging is not a smart investment method because investing in the stock market involves a lot more factors that buying a fixed amount of shares at regular intervals, it can be used to effectively reduce the cost of buying gas for you automobile.
Gas for Your Car
No matter what the gas price is you are going to have to drive you car. You can reduce this cost by filling up more often. Since gas prices fluctuate every day you can dollar cost average gas. As long as you don't go out of you way to buy gas.
The following table gives the cost of gas in Toronto every day for last month and the cost of 300 Liters of gas purchased at 10L, 20L, 30L and 40L at a time. Buying gas 10L would have been $0.56 cheaper than buying 40L at a time.
Not much but it adds up.
You would have saved more had you filled up on March 18, when gas was 103.6 but predicting gas prices has become like predicting the stock market. You never know what is going to happen tomorrow. You only know what happened yesterday and wish you have know it the day before.
Later on I am going to write a post on Advanced Gas Saving Techniques. It will be an analysis on gas trends over the past 5 years. When gas prices traditionally go up. Maybe even create a google calender on when to buy and how much based on previous years trends. This calender however will not be able to predict when the next oil refinery fire will break out.