22 March 2012

Gas Prices

Here is an absolutely astonishing and fantastic bit of information about gasoline prices. I'm stunned.  Chart is from the US Department of Energy.

If you don't read charts well, here's what it's saying:

Green line: If you subtract the effects of inflation from the price of gasoline, you can see that gasoline actually costs less as time goes by. This actually makes sense: as technology, skills, expertise and experience all increase in the oil and gas business, efficiency would also increase thereby making it cost less to produce a given amount of gasoline. It's only the changing/decreasing value of the dollar that makes it appear that gasoline costs more now than in 1920.

Blue line: Also an inflation-related chart, but a different (and less significant) one. It shows what your cost for gasoline would have been if you purchased it with 1972 dollars. It's a tricky graph, actually, since it combines two changing variables: the cost of gasoline (the green line) with the cost or value of money. It's confusing and I would recommend ignoring the blue line.

BUT WHAT IT ALL MEANS is that the price of gas is NOT going up over time (although there are short-term ups and downs). This is pretty big news, at least for me.

Environmentalists should find this news rather distressing, since it shows that the oil market—supposedly the sum total of all human knowledge relating to oil and gasoline—appears to be not the least bit concerned oil scarcity (and scarcity is a key component of the price of anything).



Aretae said...

A more likely explanation, the oil market knows more than you do...and there is no increase in scarcity, despite what Malthusian resource economic would tell you.

playman17 said...

Regardless of how gasoline prices have fared in the long run, the recent doubling is a shock to the U.S. economy, making it hard for individuals and businesses to plan, and affecting the price of anything that's transported. It falls especially hard on lower-income people, in particular those who have to commute to jobs. The ones Democrats claim to care the most about. Despite attempts to spin this, it's going to make it tough for Obama to win reelection.