In this work, the fuel economy of a parallel hybrid electric vehicle is investigated. A vehicle control algorithm which yields operating points where operational cost of HEV is minimal is suggested. The operational cost of HEV is decided considering both the cost of fossil fuel consumed by an engine and the cost of electricity consumed by an electric motor. A procedure for obtaining the operating points of minimal fuel consumption is introduced. Simulations are carried out for 3 variations of HEV and the results are compared to the fuel economy of a conventional vehicle in order to investigate the effect of hybridization. Simulation results show that HEV with the vehicle control algorithm suggested in this work has a fuel economy 45% better than the conventional vehicle if braking energy is recuperated fully by regeneration and idling of the engine is eliminated. The vehicle modification is also investigated to obtain the target fuel economy set in PNGV program.