Gas at $2? How About $3.78 (1979) or $10 (1920)?

Bloomberg Terminal | March 19 | Thomas R. Keene

[presidio9]

The wholesale price of gasoline in New York, measured in today's dollars, has reached the highest level in 18 years except for a period just before the 1991 Persian Gulf War. It's still a bargain. The untaxed wholesale price at New York Harbor is $1.12 a gallon, equivalent to about $1.90 a gallon at the retail level. In December 1979, it hit $2.86 in 2004 dollars. That would equal $3.78 at retail in today's dollars. In the 1920s, the comparable retail price would have been $10. The chart of the day {97 } traces the Bloomberg New York Harbor spot price for 87-octane gasoline at the wholesale level before taxes back to 1971, as measured in today's dollars. {MOINY87P Index DES }. The closing price yesterday was $1.1240. Only now -- for the second time since 1985 -- has the price moved above what statisticians call two standard deviations of the 18-year price trend (the yellow circle and red bands). This is a statistically significant move, suggesting more consumer pain at the pump. The last time the New York Harbor wholesale price moved above the second band it reached $1.43 a gallon in September 1990. It had reached $1.58, the high for the past 18 years, on Aug. 23, 1990.

In the 1920s

At the retail level, the average pump price nationally for self-serve regular gas was $1.724 a gallon as of Monday, according to the U.S. Energy Department. The record of $1.747 a gallon was set on Aug. 25, as motorists on their summer vacations boosted demand and refineries were shut by the blackout that extended from Michigan to New York. Weighed against consumer purchasing power, gas prices remain well below historic levels. ``A gallon of gasoline in 1920 cost $10 per gallon when comparing 1920 wages with today's,'' Stephen Moore, a senior fellow at the Cato Institute and Phil Kerpen, researcher at the Club for Growth, wrote in a September 2003 article. http://www.cato.org/dailys/09-06-03.html ``Perhaps $2 a gallon gasoline is a bargain after all,'' Moore and Kerpen wrote. They also cited the equivalent retail price in Europe -- $5.40 in the United Kingdom and Denmark. {ERFP } Oil today costs one-fifth of what it did 100 years ago and electricity is half as expensive as 50 years ago, according to Moore and Kerpen. The writers don't mention taxes, which today account for a big chunk of the price of gasoline. The American Petroleum Institute says 52 cents in taxes is added to each gallon of gas at the retail level in Long Island, New York. Hawaii has the highest tax at 53.5 cents a gallon and Alaska the lowest, at 26.4 cents. The U.S. average is 42 cents a gallon. A petroleum institute study of gasoline prices is at http://api-ep.api.org/

[presidio9]

[expat_panama]

``A gallon of gasoline in 1920 cost $10 per gallon when comparing 1920 wages with today's,''

Great post.  In this wonderful info age we live in this info is available to all.  Anyone can cut and paste the data and see for themselves.

That's what those of us who work for a living do, and the hard part is communicating the facts to others.  I believe in my heart that most people do care about reality, even though there's a very noisy minority that plays the victim, calls it 'smoke and mirrors', and cries for government protection.

[templar]

Doesn't seem to agree with what is listed here

[Glenn]

That's what those of us who work for a living do

Climb down off the cross, okay?

Efficiency in the production of gasoline in 1920 or 1970 pales in comparison to the techniques used today. Demand was different as well. This whole argument is nothing but an accountant's trick published to rationalize OPEC market manipulation that just happens to provide an advantage to BP, et al.

[ZULU]

Thats all very nice. However, I want Bush re-elected. Most slubs don't view all your data so analytically. The price of their gas goes up, Bush is in Office, they blame him.

I think the Saudis and Venezuelans and other members of OPEC don't want Bush re-elected and are creating this price increase to inflame the American Public against him.

Its important for him to get out there and say something, ANYTHING, that sympathizes with the public on this isue, even if it means just impanelling a commission to investigate the cause of this increase.

AS I said, I WANT Bush back in the White and that creep Kerry defeated. Bush has to get more aggressive and pro-active on issues and stop waiting for Kerry to self-destruct.

[kellynla]

I've been saying this all along, that prices for gas are cheaper than they were twenty years ago when adjusted for inflation. But has the average income of families stagnated and/or fallen especially since most families require two incomes to stay afloat making it even more difficult to make ends meet? I don't know.

[rightwingcrazy]

Does the price of gasoline factor into the calculated inflation adjustment? If it does, those charts are very deceptive.

[GailA]

When they complain about the price of gas point out the Federal and State taxes on it. In Tenn state tax is 21 cents per gal. Not sure what the Fed is. Gas in my small burb is $1.53 at cheapest station, to $1.66 at highest station. None of them are hurting for business. Gas is probably sans tax about a $1.20. Gotta factor in the envirowhacko formulas for places like Kali to boot.

[expat_panama]

Does the price of gasoline factor into the calculated inflation adjustment? If it does, those charts are very deceptive.

The data are there for anyone to plot, it's just copy, paste, plot, and freep....

For me, I'm satisfied that real oil and gas prices tend to track more or less together.  If you don't agree, feel free to say so, but you'll be more convincing if you spare us the anecdotes and actually go to the trouble to dig out the price records.

Most people find it easier to not bother with research, and they just sit back and snicker.  I could look at these graphs and say "oh yeah, well it doesn't have [ insert any number of gripes here]".  OTOH, if you think it's missing something, please fix it up and educate us.  If you're not sure how, I'd be more than happy to tell everything I know (we're talking small time data transfer here). ;-)

[expat_panama]

That's what those of us who work for a living do...  ...Climb down off the cross, okay?

I'm not complaining, I'm bragging.  I've got the sweetest job I've ever had in my life-- the only part I don't like is Friday afternoons when I have to quit for the weekend.  I get paid to research the economy and figure out which way it's going.  I don't get paid for winning political food fights so if you feel that the differences between the '20's and today mean that we should replace GW with Kerry, then I can't help you.

The topic is how many hours of work does it take to pay for oil and gasoline.   If you're in the oil business, you know that it takes more hours than it did in 2002, but a lot less than it did in 1981.  

Of course maybe  this is all smoke and mirrors and we need to kick out GW, but that's a different thread.  

[Publius]

This article forgets one thing. In the 1920's, few people had cars. Indeed, most people commuted to and from work on the finest privately owned transportation system the world has ever seen -- America's railroads. They took steam-powered commuter trains, electric commuter trains, high-speed electric interurbans and plain old trolley cars. The $10 cost of gasoline (in l920 gold-backed dollars) was not a problem to the handful of people who could afford a car.

[PBRSTREETGANG]

$3/gallon for any length of time and Bush may be toast. (All the nifty Powerpoint charts in the world, showing that this is really a bargain at inflation-adjusted prices, won't help him.)

[expat_panama]

$3/gallon for any length of time..

I personally guarantee that eventually the price of gas will be $10 per gallon, some day the Dow will top 100,000, and in less than six billion years the sun will explode killing all life on earth.

And since we can't do anything about it we may as well 'relax and enjoy it'.

[PBRSTREETGANG]

"Relax and enjoy it" you say?

I can confidently state that if gas hits $10/gallon or the sun explodes before November, Bush will not be re-elected. Now how do you expect me to relax?

[expat_panama]

If you want, I'll guarantee that the sun will be ok past November (or your money back). Since I'm being a nice guy, I'll also post a standing offer of regular gasoline for sale at just $9/gallon until after the election.

I guess Kerry and BinLaden are out of luck. Have a great weekend!

[rightwingcrazy]

My post was more of a question and not intended to be confrontational.

Your assertion that oil and gasoline prices track historically seems intuitive. The article makes a different point, that the cost of gasoline in terms of consumer purchasing power has been relatively steady over the decades. But it makes that point using a graph of inflation-adjusted dollars versus time. I'm used to inflation rate defined by the Consumer Price Index.

CPI tracks prices, not purchasing power. But the Cato researchers makes assertion about purchasing power, without showing enough data to back it up. Unless they're defining "inflation adjusted dollars" in a different manner than I'm used to. Forgive for not buying and reading "The State of Humanity" before daring to post!

[expat_panama]

These forums are weird.  In rereading our posts 7 and 9 I can see how you read me as being 'confrontational'.  I've never been good in people skills, I'm good at whanging on my computer and I let my wife handle 'people'.  Far from intending to be confrontational, I was trying to con you into checking my work for me for free.

I'll try again (I may not be good with people but I am persistent)..

I used historical oil prices, and divided the price by the cpi (click here  for the data I used).  I used quarterly data and the article apparently used annual data, but the outcome is roughly the same, that whatever we got now with oil prices is a lot bigger in the news than it is at the pump.

[raloxk]

I remember in Oct 1990, when Oil hit $39 avg gallon of gasoline was about $1.50 nationally. Today Oil is $38 and the national price is $1.74.

Answer: TAXES and regulations. Based on 1990, gasoline today should cost about 1.50 or slightly less so we can thank politicans and environmentalists for the difference between 1.50 and 1.74.

[RightWhale]

Have you come across the Peak Oil theory?

[expat_panama]

the Peak Oil theory?

The name isn't familiar to me-- got a link?