Yesterday, I presented an analysis on the cost to charge an electric vehicle at my home. The goal of that exercise and the one I am about to do now, is to determine whether it makes economic sense for me to purchase a hybrid or an electric vehicle.

Today, I will examine prevailing retail gasoline prices in California and estimate the number of miles I would likely drive this new car each year.

California Gas Prices Approaching Record Highs (Again)

From 1995 to 2008, average weekly California gasoline prices reached a peak of $4.59 per gallon in June 2008. While the price dropped precipitously in December 2008, it has climbed back to over $4.00 a gallon. As of the week of April 25th, the average California retail gasoline price was $4.22, and the average weekly price for the year ending April 25, 2011 was $3.32.

Source: U.S. Energy Information Administration

Given the volatility of California gas, any good analysis should use a wide range of prices to stress test the results. For instance, it is important to test if the decision will change if gasoline rockets to $10 per gallon versus plummeting to $2.

Estimating Annual Mileage

The fourth major driver that will help determine whether to purchase an HEV or an EV is how many miles I plan to drive that car annually.

There are two ways to estimate this number — a top-down and a bottoms-up analysis.

The top-down approach is the simplest.

To arrive at a number, I simply took the current mileage of my family car and divided it by the number of years we have owned it. The result was an annual average mileage of 20,209. If I assume that the family will travel the same number of total miles with two cars instead of one, and that I will drive the new car the same number of miles as the current one, my estimate would be 10,105 miles per year.

The bottoms-up approach segments the number of days I plan to use public transportation, drive into the city, travel to the airport, or visit local companies. It multiplies these individual trips by the average number of miles required for each trip. It then adds these work miles to the miles I plan to use the car for errands and vacation.

Bottoms-up Analysis

The bottoms-up approach yields 5,231 miles per year. Combining this result with the top-down analysis implies a range of approximately 5,000-10,000 driving annual miles.

Now that I have examined the four main decision variables, I will publish the initial results of my study tomorrow.

Click here for the next installment of this series.