Longing for the Gas Prices of Yesteryear?
Many different calculations have been used to figure out the current value of past gas prices in today's dollars. The general consensus is that gasoline prices peaked in 1980-1981, but estimates of what that peak price was in today's dollars vary from just over $2 to just over $3 per gallon.
Mark Perry's figures skew to the high end of those estimates. In an op-ed in USA Today last May, the economics professor argued that by historical standards, prices these days "are a bargain." But a scant 11 months after Perry wrote those words, gas prices are approaching the $3 mark -- on par with his estimate of the highest gas prices in U.S. history, in March of 1981.
In 2004, two Cato Institute scholars adjusted for inflation and then looked at the cost as compared to GDP. They said the highest that gas prices had ever been, in 2003 dollars, was $2.36 per gallon. Yet in September 2005 -- with the value of the dollar not too far off what it had been two years prior -- gasoline soared over $3. Though prices have dropped off since then, the current national average ($2.58) still tops the previous peak.
When weighed as a percentage of household income, gas expenditure had generally been falling until fairly recently. (Download analysis in .doc format.) This figure, too, is now on the rise.
Seattle Times reporter Drew DeSilver ponders why people get so riled up about gasoline while remaining relatively unconcerned with increases in the cost of bread. "We pay a lot more for groceries," DeSilver writes, "so why don't you hear legislators fulminating about extortionate milk prices?" Part of it is that since the early 1980s, U.S. consumers have grown accustomed to a particular range of fuel prices. That, and people don't buy nearly as much milk and bread as they do gasoline.
This graph of gas prices over time puts today's prices below 1980-1981, but not by much. A chart at HowStuffWorks.com shows that gasoline in the United States has averaged between $1 and $2 almost every year since 1950. Barring a radical and unforeseen development, 2006 is sure to eclipse those numbers.
Debaters, what measure makes the most sense when trying to figure out the real value of past gas prices? Do you think prices will keep rising as rapidly as they have over the last year? Should the government step in to keep fuel costs down, as governments do in countries like Venezuela and Turkmenistan? (More on those countries, and worldwide gas prices, coming up in the next post.)
By Emily Messner |
April 4, 2006; 11:09 AM ET
| Category:
Economics
Previous: The Facts: Gasoline Prices |
Next: Gas Prices Around the World
Posted by: Sully | April 4, 2006 12:33 PM
It is VERY obvious that the repetitive posting of RECORD profits by the oil companies EVERY QUARTER despite everythiong from war to hurricanes in the Gulf of Mexico is a large factor in the disgruntlement of consumers. To the worker making a little over $6 an hour and on a fixed budget, the increase in the cost of gasoline, fuel oil, and other petroleum products, combined with the increases in the prices of other products due to high fuel costs is devastating when they take into account of the "earnings" being pocked by the fat cat stockholders when THEY could not even afford to buy a pennies worth of stock.
Posted by: Dale Sadler | April 4, 2006 12:43 PM
Wow Che! Who knew! Gas prices are up because people slander celebreties who make politcal comments! I guess that means the prices will drop if we let celebrities speak their mind? You learn something everyday... Thanks Che, for being such a positive addition to the debate.
Posted by: Freedom | April 4, 2006 01:09 PM
Two things:
1. One reason why people feel gas prices are higher than they are is the number of people with really inefficient gas guzzling cars, now unable to fill their tanks.
2. Everyone knows it's going to get worse and it won't get better, so they're anticipating the coming bad news.
P.S.: I usually walk to work, but drive on occassion (36 mpg)
Posted by: Will in Seattle | April 4, 2006 01:09 PM
Will in Seattle,
Perhaps I am wrong, but hasn't mpg actually risen in most cars over the last couple decades? So theoretically, wouldn't your statement have the exact opposite effect, as: if people were used to inefficient cars, more efficent (although less efficient compared to yours) are introduced, people see prices as lower?
Posted by: Freedom | April 4, 2006 01:16 PM
After reading a previous post, i had to make an additional comment. Another interesting situation is that i recall recently seeing that Exxon has yet to complete the compensation to human victims of the Valdez disaster DESPITE record profits every quarter during the reign of the Bush Administration. Seems like the King has only protected his court and done little to protect his "subjects". The really sad thing is that the obvious truth will come to light ONLY after the damage has been due to the ineptitude of the opposing party. I can remember when the Republicans (despite being in a minority at the time) raised total havoc for a Democratic president. The Democratic Party has shown itself to be totally gutless in almost every aspect for the last 5 years despite the obvious total bumbling by the current Administration. This goes for the increases in gasoline prices also.
Posted by: Dale Sadler | April 4, 2006 01:51 PM
what Dale Sadler said
Posted by: patriot1957 | April 4, 2006 01:53 PM
Harken back to after 9-11, when people would have jumped off a cliff like lemmings if Bush asked them to. Remember well that time when our president stood by smiling benevolently counting his 30 billion silver pennies as cars got bigger, mileage plumetted and public transportation crumbled.
Now imagine that instead of telling us it was unpatriotic to worry about our civil rights, imagine that instead he told us it was unpatriotic to continue to guzzle gas an an ever increasing rate. Imagine that instead of sending your brave kids to the Middle East to die alongside the dying American auto industry, imagine that he charged Detroit with making, and Americans with being patriotic enough to buy, today's technology, hybrids. Imagine all the taxes coming in from all those autoworkers and the trickle down effects. Imagine if he had asked why only Japan could build a minivan rated for 40 mpg (the 2007 Sienna), and not America.
According to the NRDC we could cut our Middle East imports 80% if all passenger cars got 40 mpg. We could cut ME imports 40% just by recycling our recyclable paper products. Imagine if Saudi Arabia saw taht the US was seriously on the path to no longer needing their oil within a decade. Imagine their sudden receptiveness to the words "if you don't control your terrorist problem we'll stay on this path and never look back. Go sell to China and start blowing them up when they piss you off and see how far you get".
What a miraculous turnaround we'd see. INstead of secretly funding terrorists, they'd be cleaning up their acts. Be nice to the customers or they'll shop somewhere else.
Bush sold us out for 30 billion silver pennies. That is how he will go down in history.
Posted by: patriot1957 | April 4, 2006 02:06 PM
On fact that noone seems to hit upon is that America loves it's cars. It also seems that the more affluent the family they show their status by driving SUV's and Hummers. Like; Look at me I drive a big ole gas guzzling Hummer cause I can afford it. All these suburbanites probably will never go to a place that SUV's or Hummers were originally built to go. The original SUV's were the Ford Bronco and the Chevy Blazer and they were made for serious off road driving or plowing snow. Here in S. Florida all the suburbanite mommies and their husbands seem to drive SUV's or Hummers and there sure as hell isn't any snow to plow down here. When the auto makers quit putting SUV's on truck chassies and made them to ride like the family car that's when the craze for buying them came about. If the auto makers put them back on truck frames you can bet that suburbanite mommy wouldn't want to drive one.
Besides King George sold the American people out. When he said Americans were addicted to oil, but never raised the gas milage standards on either cars or trucks, and our lawmakers just keep getting free money from the oil companies by way of lobbiests, they won't because the oil companies want to keep raking in these record quarterly profits. You all need to remember that king George comes from oil and he definetely won't let anything happen to his flow of cash, so don't expect prices to fall.
Have you ever noticed that when the oil companies start raising their prices that untill a majority of people start screaming for taxes on their windfall profits that's when the prices fall back down, but never to the level they were before they started raising them from. After they keep them stabilized for a while they start raising them up again until they can get them to where they want them. I just figured I would add what I have noticed over my time.
Posted by: Lab Rat | April 4, 2006 03:05 PM
There is one thing that i have failed to see anyone mention. One talkes about 'Gas Guzzlers' like the rich are the only ones that drive them. There are other factors to be considered. Many of the poor find that the ONLY vehicles available to them at as price they can afford ARE "gas Guzzlers". These vehicles usually not only burn a lot of fuel, but their motors are in such a condition that they are far from efficient. When one cannot afford to pay NOW, then they must pay LATER. Another point about the RECORD PROFITS of the oil companies. They are NOT alone. Has anyone ever noticed that despite disasters like Hurricane Katrina, insurance companies still are never really hurting. Between loopholes on their policies and governemnt bailouts (usually at the expense of the victims) they ALWAYS come out ahead. I would also be willing to bet that the same will happen with regard to the victims of the record record rains in both Hawaii and the west coast of the continental U.S.
Posted by: Dale Sadler | April 4, 2006 03:39 PM
Dale Sadler misdirects himself if he thinks companies that are the beneficiaries of a high price for the global commodity they produce - are the cause of why prices are high.
The same oil companies and their supplie and service providers were punished, with "loss years" and mass layoffs - in the 80s and 90s with huge gluts caused by OPEC overproduction.
Demand and supply set price, and companies or individals with stocks of the commodity gain or lose on price.
It's difficult to get Lefties to think about economics, when they prefer to "feel".
If you have a rebar steel factory and your price has tripled because Rising China is buying every scrap they can globally, and putting out Politburo 5 Year Plans locking rebar production to go to China by contract at current high prices (they are scooping up global oil, nat gas, and strategic metals reserves, too) - do we demand the government take excess profits so American rebar consumers get a subsidy?
What about if China's voracious steel demand plummets in 5 years and steel prices tank due to global overcapacity? Do we demand consumers in America pay more for rebar so they subsidize steel company owners and operators?
The oil situation is straighter in nature in that all the supply is sucked up no matter how much new production is found, and there is no readily available substitute material. So oil companies will profit hugely. I have no problem with that as long as the profit isn't bled out by fatcat CEOs and shareholders - but goes to new energy development and having the financial strength to fight Rising China as it tries locking up as much of the world's oil reserves as it can for the People of China's future, exclusive use.
Posted by: Chris Ford | April 4, 2006 06:58 PM
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"Seattle Times reporter Drew DeSilver ponders why people get so riled up about gasoline while remaining relatively unconcerned with increases in the cost of bread."
One only needs to drive around a state or even a large region and you will see little difference in the price of gas. Yet I can see huge differences in the prices of bread or milk based on type, brand, etc... So I can buy expensive Peperidge Fram bread or a cheap generic and feel as though I have a choice as to what I'm buying. But gas is something that I do not see much difference by brand or location.
I have heard many times that gas is one area essentially comes from one source, even for rivals stations such as Exxon and Shell since those stations are independently owned. Thus a Shell and Exxon across the street from one another will have the same price sice they bought the gas from the same distributor. So what is one to do? The problem is that I feel control over the bread I buy but I have little control over the gas I buy. That is what is fueling my anger, that and Exxon's record profits. If Pepperidge Farm made all the different brands of bread I find in the store and they all tasted the same and the prices were the same, then I might be made about the price of bread.