WordPress

Is Gasoline Becoming Unaffordable? – Energy Institute Blog – Energy Institute at Haas

Summary

Not if you can remember the world before COVID.

In 1960, gasoline cost $0.31 per gallon. Isn’t it outrageous that it costs more than $0.31 today?  

If you think that’s a ridiculous statement, you might be as exasperated as I am with the media coverage of the gas prices over the last month. The standard story breathlessly tells us that the California price has hit a new record, or that the average price in the US is much higher than it has been in recent years. Ver…….

Not if you can remember the world before COVID.

In 1960, gasoline cost $0.31 per gallon. Isn’t it outrageous that it costs more than $0.31 today?  

If you think that’s a ridiculous statement, you might be as exasperated as I am with the media coverage of the gas prices over the last month. The standard story breathlessly tells us that the California price has hit a new record, or that the average price in the US is much higher than it has been in recent years. Very occasionally, it might even include a graph similar to this one showing the average price over many years. (Details on all the data/calculations in this blog are at the end.)

(Source: Author Calculations from EIA data)

But if you are not outraged that gasoline is more than $0.31 per gallon today, you probably realize that the graph above is not telling the whole story. A lot has happened to prices of other stuff over the decades. If you ignore that fact, then everything seems unaffordable today, whether it’s food or housing or a haircut, or even a Thanksgiving turkey. What is clear from the graph above is that gasoline prices have gone up a lot since they bottomed out in the first couple months of the pandemic.

The real story

Adjusting the gasoline price data for inflation, of course, produces a less media-friendly storyline, as the graph below shows.

(Source: Author Calculations from EIA data.  All prices in Nov 2021 real dollars)

US and California real (i.e., inflation-adjusted) gas prices are nowhere near all-time high, at least a dollar lower than just before the financial crisis tanked the economy in 2008, lower than during many of the recovery years after that crisis, and only slightly higher than they hit in the year or two before the pandemic.  

Sure, they are much higher than they were in the depth of the pandemic depression, BECAUSE NO ONE WANTED TO BUY GAS THEN.  Uh, sorry for yelling.  But shouldn’t it be pretty obvious that the price of a good when demand suddenly drops by half isn’t what we should be expecting for the long run.

Protecting vulnerable households

Some will respond by pointing out that people who can barely afford to buy gas at all get hammered when its price is high, and they need some help. I agree completely.  But focusing on the price of gasoline obscures the larger social issue. The problem is rising income and wealth inequality, which makes everything harder to afford, including housing, food, and, yes, gasoline. Unlike housing, however, as the graph above shows, gasoline prices haven’t actually risen much in real terms over the last 17 years. What we need to address is the everything affordability crisis for people being left behind, with stronger social programs, educational options, and job opportunities.  

We don’…….

Source: https://energyathaas.wordpress.com/2021/11/29/is-gasoline-becoming-unaffordable/