Saturday, September 23, 2006

Would You Trade Today's Gas Prices for Yesteryear?

Feeling nostalgic about the "good old days of 'cheap' gas prices?" Below are the average retail prices for gasoline in the U.S. during previous decades, according to the U.S. Energy Information Administration:

1920s: 23 cents/gallon
1930s: 19 cents/gallon
1940s: 22 cents/gallon
1950s: 29 cents/gallon
1960s: 32 cents/gallon
1970s: 54 cents/gallon
1980s: $1.11/gallon

Would you be willing trade today's "high" gas prices, now about $1.97 in some Michigan areas according to, for yesteryear's "cheap" gas prices above? If so, you are suffering from "money illusion," the confusion between real, inflation-adjusted prices, and nominal, current, or unadjusted prices! Here are historical retail gas prices in TODAY'S dollars:

1920s: $2.68 /gallon
1930s: $2.69 /gallon
1940s: $2.36/ gallon
1950s: $2.17 / gallon
1960s: $2.01 /gallon
1970s: $2.02/gallon
1980s: $2.21/gallon

Gas prices today are 25% below the 1920s price, adjusted for inflation!

So far, the historical record for average, monthly retail gas prices was set in March 1981, when the price for gasoline averaged $3.12 per gallon. In fact, there were 10 months in 1980 and 1981 when retail gas prices were above $3/gallon. There has never been a single month since then when real gas prices have averaged more than $3/gallon. The highest monthly average price in recent years was $2.87 per gallon last September 2005, after the hurricanes wiped out most of the oil production in the Gulf Coast area.

And here is maybe the best news of all: The Energy Information Administration expects retail gasoline price to fall by another 25 cents by the end of the year! Carpe Diem!


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