Real Gas Prices: We've Had It Good for a Long Time
The chart above was created using inflation-adjusted gas prices from the Energy Information Administration from 1919 to 2008, along with the overall trend line for gas prices over the last 90 years.1. The trend line shows that real gas prices (2007 dollars), started from a price slightly above $3 in 1919 and in general, on average, declined by a little more than 1 cent per year to about $2 in 2008. Obviously, gas prices are now way above the trend, but the general trend for the last 90 years has been steadily falling gas prices.
2. Real gas prices in 1919-1922 averaged $3.08 per gallon, higher than the average price so far this year of $2.98. And real GDP per capita today ($43,000) is about 6.5x higher than in 1919 ($6,675). In other words, adjusted for differences in real income, our ancestors in 1919 paid the equivalent of about $20 per gallon!
3. In the 69 years since 1940, real gas prices have been below the historical trend in 57 of those years and above the trend for only 12 years.
Bottom Line: Despite today's high oil and gas prices, we've had it pretty good for a long, long time, with a long-run historical, 90-year trend of a decline in real gas prices.
3 Comments:
Hah! Just this AM I figured I can take $7.56 / gallon gasoline just fine.
Gasoline is not changing in price vs. gold, silver, or any other commodity. What is happening here is the dollar is falling like a rock on it's way to it's ultimate real value which is zero.
The future
Before World War I Germany was a prosperous country, with a gold-backed currency, expanding industry, and world leadership in optics, chemicals, and machinery. The German Mark, the British shilling, the French franc, and the Italian lira all had about equal value, and all were exchanged four or five to the dollar. That was in 1914. In 1923, at the most fevered moment of the German hyperinflation, the exchange rate between the dollar and the Mark was one trillion Marks to one dollar, and a wheelbarrow full of money would not even buy a newspaper. Most Germans were taken by surprise by the financial tornado.
http://www.pbs.org/wgbh/commandingheights/shared/minitext/ess_germanhyperinflation.html
Mr. Perry's calculations don't even take into account the real value of a gallon of gas over time. Versus the average automotive gas mileage in 1970, a gallon of gas now goes -- what -- twice as far?
Matched against the CPI and technology, the hyper-efficient delivery of energy over the last several decades has been little short of a miracle.
Something to consider when the "greedy oil company profits" discussion gets going. (Not that this matters to those whose brains can work politically, but not arithmetically.)
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