March 9, 2005

NOTHING EVER COSTS MORE ANYMORE:

Gasoline prices 2005: An inflation-adjusted bargain (John Stossel, March 9, 2005, Jewish World Review)

[I]t's time to wake up from the gas-price nightmare. All these media people are saying the gas prices are high for one simple, simple-minded reason: They are looking at big numbers — but they are not accounting for inflation. So the numbers look bigger than the costs actually are. That's what inflation does. The reporting is irresponsible and silly. Not adjusting for inflation would mean "Shrek 2" is one of the highest-grossing movies of all time.

If you don't account for inflation, lots of prices keep going up. Comparing a price in the dollars of the 1930s — when "Brother, Can You Spare a Dime?" referred to a much more meaningful amount of money than a dime is today — to a price in 2004 dollars is like comparing a price in dollars to a price in yen.

It's not as if the reporters would have to work at doing calculations to figure this out. Not only are there instant inflation calculators on the Web, but the federal Department of Energy accounts for inflation in its annual report of gas prices. It says gas is actually cheaper now than it was throughout most of the 20th century. Yes, it's 65 cents more than it was six years ago, but it's nearly a dollar cheaper than it was for much of the 1920s and '30s — and more than a dollar cheaper than in 1980.

By failing to account for inflation, the media have some Americans so alarmed that we can't think straight. "What costs more," I asked customers at a gas station: "gasoline or bottled water?" The answer I got from almost everyone was gasoline.

At that very gas station, water was for sale at $1.29 for a 24 oz. bottle. That's $6.88 per gallon, three times what the gas station was charging for gasoline.

It gets sillier.

Posted by Orrin Judd at March 9, 2005 7:37 AM
Comments

You can get water by the gallon for several quarters. The gas stations are gouging you over Aquafini, Dasani or any other soft-drink company marketed bottled water. It's like complaining about how expensive candy's become if the only place you buy it is at the movie theatre.

Posted by: Chris Durnell at March 9, 2005 10:49 AM

Yes, gas is cheaper now adjusted for inflation, but the trend for gas prices right now is up, and will continue so for some time. So you either have to admit to a rise in inflation in saying that gas won't get more expensive, or you have to admit that gas is getting more expensive.

The problem is that in the past wages in the US went up faster than the cost of commodities. Now they aren't, wage growth is trailing.

Posted by: Robert Duquette at March 9, 2005 1:30 PM

A 15 year old can walk into any McDonald's and get a job that pays 3.5 gallons of gas an hour. What did his grandfather make?

The wage lag is a function of deflation.

Posted by: oj at March 9, 2005 1:39 PM

OJ: Dump the Suburban while it still has some value and buy a Subaru Forrester.

Posted by: Robert Schwartz at March 9, 2005 3:20 PM

(self reference alert) I tow a 3000 pound BBQ pit catering rig with my F150. It gets 10 miles to the gallon - whatever the gallon costs. When gas prices go up enough to bother me, the price of BBQ goes up.

Posted by: John Resnick at March 10, 2005 12:02 PM

Robert:

If you never leave your own county gas is barely a consideration.

Posted by: oj at March 10, 2005 1:22 PM

John:

And business goes to a cheaper rival.

Posted by: oj at March 10, 2005 1:23 PM
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