Chart of the Week: Inflation Adjusted Gasoline

Over the past century, as the industry became ever more
adept and efficient at finding, pumping and refining oil, Real Gas prices did
not keep up with inflation.
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85 Years of Inflation Adjusted Gasoline

Real_gas_graphic_nyt

Graphic courtesy of the NYT

This long downtrend shows a minor spike in the 1930s, which
eventually reverted back to trend. There was a major spike in the 1970’s; It
subsequently collapsed in price some 50%, from $3 / gal to $1.50, over the 1980
to ’84 timeframe. It would not be outrageous to call that price action –
particularly the 1970s – bubble-like.

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Quote of the Day:

"Winning can be defined as the
science of being totally prepared."
~George Allen, Football Coach

What's been said:

Discussions found on the web:
  1. MaxSpeak, You Listen! commented on Aug 17

    CHART OF THE WEEK

    Things that make you say “Hmmm” Department is unearthed by Barry Ritholtz at The Big Picture….

  2. Welby commented on Aug 17

    Just wondering-

    On average are we using more gas per capita due to longer commutes, etc? How does the average weekly expenditure on gasoline (inflation adjusted) chart out?

  3. joe commented on Aug 17

    Just a few small points.

    The old Model T got better gas mileage than a new Escalade does and people didn’t commute as far.

  4. Larry Nusbaum commented on Aug 17

    According to my financial planner: I am worth more dead than alive. However, the way I see it, I have enough money to last the rest of my life………………provided that I die by 7:00 pm!

  5. erikpupo commented on Aug 17

    The primary reason that the current price has not significantly dimmed demand cannot just be demand itself. Other unique facets of the US and world economy are to “blame” as well, specifically the abundance of credit.

    Basically, gas as a commodity can still be purchased on credit regardless of price, This is not something that was necessarily possible in the 1930’s or 1970’s, when credit was not as available and the rise in prices came DIRECTLY out of the pocketbook. During this spike, the pain can be deferred by credit, which allows for the payment of even gasoline over time (look at the proliferation in gasoline credit cards and the assorted gimmicks associated with them).

    Granted, this is not the only reason. Demand outstrips supply as in the 1970’s and the total supply of oil is not the only problem; the oil needs to be refined into gasoline. But credit abundance certainly plays a much larger role than in the 30’s and 70’s when credit was more constrained.

    Of course, this presents a much larger policy problem; if the Fed’s interest rate hikes have not been enough to slow use of consumer credit, and if higher gas prices have not signficantly changed demand for gasoline, what exactly can be done to stop the demand for gasoline (other than supply overcoming demand)? It would seem only a reduction in the availability of credit would do that.

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