March 9, 2004
THE RECORDING INDUSTRY:
RECORD NUMBER OF MISTAKES ABOUT "RECORD" GAS PRICES (Easterblogg, 3/08/04)
"'The administration is extremely concerned' about the near-record gasoline prices, Energy Secretary Spencer Abraham said." So read the lead story of USA Today on Friday. Over on CBS News, Dan Rather intoned that gasoline prices "could hit a record." Many other news organizations said about the same. In fact, gas prices are nowhere near a record level.Last week the national average for regular unleaded was $1.71, while "the record," USA Today declared, was $1.74 in August 2003. But all that matters to consumers is inflation-adjusted cost, and in this real-dollar calculation, gasoline prices remain about where they have been for most of the postwar era. This chart shows that the actual U.S. record price for gasoline occurred in 1981, when regular unleaded cost $2.80 in today's money. (The chart is in 2002 dollars; add 2 percent for current dollars.) The current gas-price level that Spencer Abraham, Dan Rather, and others are hyping as close to "the record" is actually 39 percent lower than the true price peak.
Another comparison: The average price of gasoline during the 1950s was about $1.80 in today's money--meaning that during the period enshrined in our collective political nostalgia as Energy Heaven, gasoline cost slightly more in real dollars than the amount now being theatrically bemoaned as a "record" price. But wait; in the 1950s, per-capita real income was less than half what it is today. That means that for the typical American in the 1950s, gasoline cost twice as much, in terms of buying power, as today's gasoline. Adjusted for inflation and for buying power, the purported "record"-priced gasoline at your pumps now is substantially cheaper than the gasoline your parents bought.
There's a very cool economic measurement--though I can never remember what they call it nor find where the data is listed when I want to refer to it--where they look at the number of hours the average American has to work to afford something. So, for example, your grandfather had to work 8,000 hours for his first television but you only had to work forty, and so on. Life just keeps on getting easier and we just keep getting whinier. Posted by Orrin Judd at March 9, 2004 8:39 PM
I just bought a TV for $2700. Hey, it's only two months rent. When I was in grad school paying $140/month for rent, I bought a TV for $320, which was more than two months rent. By the "months of rent" measure, my flat-panel HDTV actually costs less.
Despite the artful comparisons, this is one issue where Bush will feel the voters' pain. Gas at $2.00 a gallon will hurt him directly. Of course, with a President Kerry, it will probably be $3.50 a gallon by 2007, but no one will think about that right now (remember 1979?).
Posted by: jim hamlen at March 9, 2004 10:32 PMIt should be 3.50, but $2 of it should be taxes.
Posted by: oj at March 9, 2004 11:09 PMThen there are the things that gramps could never buy at any price, like a week's vacation in Cancun, or a computer, or a heart bypass operation or a microwave oven.
As for gas taxes, you could start by getting New Hampshire legislature to set an example for the nation by raising its state taxes at least enough so that the Upper Left Washington is no longer at the top of the list.
oj:
Wow--did Easterbrook really write something about fuel prices without ranting about SUV's? Or did you just leave those parts out? :-)
Posted by: Kirk Parker at March 10, 2004 1:54 AMNo one can doubt that, today, gasoline is a major commodity. Consequently the price data is available if you're willing to search for it.
The API(American Petroleum Industry) has a 30-page pdf file, "How Much We Pay for Gasoline." It shows yearly prices back to 1918 with graphs and their interpretation. Go to website www.api.org , do a search with 'How Much We Pay for Gasoline' and it brings up:
http://apiec.api.org/filelibrary/howmuchwepay2002.pdf If you take issue with their Consumer Price Index values, put your own in a spreadsheet and spit out your personalized claim about Big Oil abuse. Join the trendy victimization set.
Also, a search brought up the following "InflationData.com" site:
http://inflationdata.com/Inflation/Inflation_Rate/Gasoline_Inflation.asp
showing a gasoline trend for the last two decades as http://www.chartoftheday.com/20030827.gif . What's seen on this chart as the price dip in late 1998, which led to claims that we had witnessed the very LOWEST gasoline prices EVER(i.e., for over a century.)
This Cato Institute writeup has a graph showing the 6-to-8 yr "OPEC spike" which includes the post-World War II maximum:
http://www.cato.org/dailys/09-06-03.html