Seriously, gas isn't THAT expensive
You've heard this point before, but despite the price of gas being at record levels, adjusted for inflation, it's still not the most expensive we've ever paid for dead-dino juice in the U.S. The Auto Prophet, one of the original auto-related bloggers that's still keepin' it real, found this informative chart (see larger version here) from InflationData.com that illustrates this fact in a straightforward way. The black line is the actual average price of gasoline in the U.S. since 1918, while the red line represents the price of gas since 1918 adjusted for inflation.
The most we've paid for gas was when we first started buying a lot of it back in 1918 when the chart begins. That year Americans paid an average of around a quarter per gallon, or just under $3.50/gallon in 2007 dollars. Last week's record average price of $3.28/gallon still falls below those early levels.
The chart is particularly interesting because it shows a general downward trend in the cost of gas when it's adjusted for inflation. There are spikes in the red line from the oil embargo in the '70s and the recent increases since the war in Iraq and Hurricane Katrina hit, but if you watch the red line we should expect the price to go back down. Unfortunately, the actual price of gas will probably continue to rise as it has since 1918, as well. Just as long as it doesn't catch up to the inflation curve, the sting won't hurt so much.
[Source: The Auto Prophet]
Reader Comments (Page 1 of 4)
Steve C 11:10AM (5/30/2007)
Unfortunately true that we've actually paid less and less for gas over time. My guess, however, ist that trend has just bottomed and we will now continue to pay relatively more and more, unless and until we replace the demand for gas with something else that is not subject to either: politically-driven pricing (crude oil) or short-term limited supply (ethanol, hydrogen, etc.).
Said another way, if we'd invested the difference between what we've paid and what we should have paid, we'd be energy-independent from the mideast.
Ain't 20/20 hindsight great?
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THOMAS 11:13AM (5/30/2007)
that's funny; yesterday you guys said that the $200/year additional cost of premium fuel for the CX-7 "overshadowed" the positive attributes of the car.
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Don 4:25PM (5/30/2007)
When an '07 Expedition with V8 gets 16 mpg, and the CX-7 gets 14 mpg during testing...I'd say the positive attributes go right out the window.
bgdc 11:18AM (5/30/2007)
How common was the car in 1918? Yeah, it was a major luxury item, so comparing a basic commodity today to a luxury item of 90 years ago is kinda silly.
FWIW, $3.50 a gallon is the max, eh? I've been paying over $3.50 a gallon in so cal for more than a month.
Agree with poster 1 - we should have been and we still should be pushing hard for new energy sources. But we aren't because we're myopic and arrogant americans.
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the marais 11:19AM (5/30/2007)
Interesting how oil cartels drive up prices.
Does this chart take into account federal and state taxation components as well?
I imagine that in 1918, prices were higher due to transportation costs, lack of infrastructure, antiquated refining technology, possible rationing and shortages due to World War I, etc. Given the state of the world in 1918, compared to the pre-OPEC era, the U.S. obviously developed a super-efficient and cost-effective method of refining and delivering gasoline.
Too bad worldwide demand, cartels, refining capacity, and oil company profiteering have reduced that economic efficiency ratio by about eighty years.
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Viv 11:20AM (5/30/2007)
Who cares about numbers from the stone age? I paid $0.99 cents just four to five years ago and now i am paying $3.30.
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Ricardo 11:24AM (5/30/2007)
i know someone somehow will blame Bush for everything, including 1918 prices. lol.
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Solo Racer 12:01PM (5/30/2007)
"i know someone somehow will blame Bush for everything, including 1918 prices. lol."
His grandfather's fault, of course. But seriously, are you so naive that think high gas prices have nothing to do with an administration run by oil industry pols?
Barney 11:11PM (5/30/2007)
"...somehow will blame Bush"
He's working hard to get those oil wells going in Iraq.
Roger D 11:26AM (5/30/2007)
Do you really think people listen to this "adjusted for inflation" BS. Sorry, people werent screaming and moaning when gas hit 36 cents a gallon. They screamed and moaned when they had to wait days to get gas in the early 1970's. Filling up your 22 gallon tank for about 7 bucks wasn't a pocket breaker even back then. Now it costs over 78 bucks to do the same thing where I live. Everyone I know is howling about it. The problem is most of us can't trade in our gas hog any time we feel like it. Being "upside down" in a loan is not a wise idea.
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ViktorVaughan 11:56AM (5/30/2007)
Maybe you shouldn't be stupid enough to be upside down on a car loan? Nobody held a gun to your head when you signed the loan.
And gas was not 0.99/gal anytime in the past 4 or 5 years, whomever was stupid enough to claim that. The last time gas was $0.99 was back in '98.
Mattlach 1:02PM (5/30/2007)
The truth is that gas prices are high due to refining capacity not being high enough and the slightest servicing or problem spikes prices.
If we dig a little deeper the problem is that there is no incentive for oil companies to increase refining capacity, because if they do they will not only have spent billions, but also be thanked by making less money.
I'm not Bush fan, but I just can't peg gas prices on his administration. The only way to solve gas prices economically would be to force gas companies to make billion dollar capital expenditures. This would have major implications on our entire way of life, and freedom of individual ownership, making us essentially look like a new Soviet-style planned economy.
Apart from that the only thing I can think of is spending tax dollars to build federally owned refineries. That way refining capacity would go up without taking the unconstitutional steps of forcing a person or company to spend their money against their will. Hmm. This may actually not be a bad idea...
That being said, I think whining about gas prices is pretty lame. I drive pretty decent 30 mile commute each way in a car that uses premium gas, and it only makes a difference of about $15 a week for me if gas jumps a full dollar, which it has not.
I think it would actually be pretty nice if gas prices rose even more. it would give us more incentive to get off of our depending on unstable parts of the world for our energy.
I propose a federal gas tax raising prices to about $8 per gallon (same as they pay ion some european countries). Roughly half of the proceeds should go to subsidizing alternative fuels at the end user level, and roughly half should be spent on developing new alternative fuel technologies.
Solo Racer 1:29PM (5/30/2007)
Refining capacity hasn't increased in something like 10 years. What I don't buy is that the demand curve matches the price curve. It doesn't. That's why the current price levels are suspect.
Government owned refineries. Probably never going to happen. Too much like Mexico and Venezuela.
SHOTT3R 11:30AM (5/30/2007)
Yea sure gas is not at an all time high compared to inflation. What everyone fails to realize is that real buying power of everyone has dropped [well except for the rich douchebags]. Back in the 1960s, one middle class income could buy you a house, now two barely can in most of the country. The middle and lower class are being squeezed by illegal immigrants, and offshoring. Net result is that people are spending a much higher proportion of their income on fuel costs. And that isn't gonna go down anytime soon.
As to all those free market idiots, the free market model doesn't work for price-inelastic essential goods. It just gives the capital holders license to bend the consumers over. Sure people could try to conserve (and they're going to have to), but the US unfortunately chose to build around a model of gigantic urban sprawl, essentially betting on permanently cheap energy, unlike Europe. I predict the US will not not exist as is in 30 years. It's going to have to break into small clustered nation states. Local economies are going to become a lot more important in the face of spiralling travel and distribution costs.
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Strom 12:52PM (5/30/2007)
SHOTT3R - You're completely wrong. As measured against the purchasing power of Americans, gas isn't really that expensive. What has made everyone feel that gas is expensive is actually the unusually low prices we experienced in the 90's. See the above link for all the information you'd like.
Keith 11:31AM (5/30/2007)
Is it not true that fuel prices are a major element in inflation calculations? Higher fuel costs make everything more expensive, no?
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paul34 11:58AM (5/30/2007)
You are absolutely correct.
This is also why *everyone* should be concerned when gas prices go up significantly... because even if don't have a car, it will still affect you!
bah =/
paul34 12:01PM (5/30/2007)
That's correct. This is also why everyone should be concerned about significantly increasing gasoline prices. Even if you don't have a car, it will still affect you. Everything depends on gasoline.
It's unfortunate, but that's the way it is. If we start (seriously) trying to change that now, then by the time the oil actually runs out/we go to world war (whichever happens first, because both are inevitable IMHO), maybe we'll be ok.
Plus, I know Europeans like to make fun of us for complaining about our gasoline prices... which, admittedly, I'll give them that. Yes, we complain about $3/gal while they pay $7-8/gal. But, aren't their prices going up too?
tenaciousJk 11:33AM (5/30/2007)
How long ago do you think the oil companies did these same calculations? They'll charge us whatever they want and use this chart as justification.
The cost to produce gasoline has steadily declined as refinement and locator technologies improved to yeild more oil. However, seemingly overlooked, is the fact that the infrastructure to deliver the gas/oil and the refineries themselves are suceptable to the slightest of problems - the excuse used most frequently for rising oil prices.
You'd think that some redundancy and effeciencies would be built in to the refinement process to ensure the refineries and pipelines never shut down.
Oops! all of a sudden we have to shut something down. Prices go up. Genius.
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bmoredlj 11:34AM (5/30/2007)
In response to the title of the post:
Yes, it is, actually.
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