Saturday, November 15, 2008

How Does $2.12 Gas Compare to Past Prices?

Feeling nostalgic for the days of 17 cent gas in 1931, 20 cent gas during WWI, the gas below 30 cents during the first half of the 1950s, or the $1.40 gas of the early 1980s? If so, you'd be suffering from "money illusion," the tendency to confuse nominal and real (inflation-adjusted) prices. Gas is cheaper today in real dollars than any of those past prices.

The chart above displays real gas prices going back to 1919 (EIA data here), showing that the current national average price of $2.12 is below the price of gas during the entire decades of the 1920s, 1930s, 1940s, 1950s, about the same as the average price during the entire 1960s, below the average price during the 1970s, and below the average real price of gas during the entire 1919-2008 period ($2.36).

Note: This analysis compares the current average retail price of $2.22 per gallon (according to AAA) to the average real gas prices (in 2008 dollars) annually for years from 1919 to 2007, for comparison purposes of what American consumers are paying today for gas versus what consumers paid for gas in the past. Also, the EIA data in 2007 dollars have been adjusted here to 2008 dollars.

6 Comments:

At 11/15/2008 10:59 AM, Anonymous Anonymous said...

Yet, oil is a heckuva lot harder to find!

Oil used to seep to the surface. Now, we drill 2+ miles deep for 50% chance of finding oil, and even it may run dry in 3 years.

 
At 11/15/2008 12:20 PM, Anonymous Anonymous said...

We drive more than the first part of the century, so even lower prices take a bigger chunk of consumer's money.

Consumer's aren't complaining about $2.00 gas; they complain when it's $4.00.

What about "money illusion" using Dow Jones numbers. It's a farce when investors compare the current Dow to previous Dow totals, let's say for example, to Dow in 1980's. They are not factoring inflation and the diluted dollar from the money supply since the 80's.

 
At 11/15/2008 2:14 PM, Blogger K T Cat said...

Chart borrowed, link given.

Thanks for posting things like this!

 
At 11/15/2008 5:45 PM, Blogger Gary R. H. said...

With charts like this, important dates should be marked. In the early half of the century, cars weren't very common, then the depression happened so of course gas is going to be expensive. After, it is relatively cheap going into the Iranian crisis, then it goes down again until the current economy.

 
At 11/17/2008 5:35 PM, Blogger OBloodyHell said...

> What about "money illusion" using Dow Jones numbers. It's a farce when investors compare the current Dow to previous Dow totals, let's say for example, to Dow in 1980's. They are not factoring inflation and the diluted dollar from the money supply since the 80's.

Uh, yeah. Because the 10-14k we had for most of the Bush admin is clearly less than the steady 1k we had during the entirety of the 60s and much of the 70s, adjusted for inflation.

And the 2.5k or so for the DJIA climbing through the 1980s? Also a lot more, after inflation adjustment, than the 00s...

Oh, wait. Inflation since 1980 is right around 100%, making that 2.5k into 5k or less.

But.. But... But the inflation since 1960 has got to be more than 10x... right?

S:-/

> then the depression happened so of course gas is going to be expensive.

Uh... Gary: if an economic downturn drives the price of gas UP, then why is it at $2.10 now?

Methinks your argument has a rather large hole in it.

 
At 4/16/2011 1:13 AM, Blogger Milton said...

The price of gas in recent years is skewed by significantly higher taxes added on and included in the 'retail' price. Here in California the government takes 66.1 cents a gallon! (State-47.7, Federal-18.4).

 

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