Gasoline Prices (Adjusted for Inflation)

If you want to understand why Gasoline prices have had only a moderate impact on the Economy, consider its price on an inflation adjusted basis.

CotD notes: "Over the last five weeks, the
average US price for a gallon of unleaded has shot up 28 cents per
gallon and has reached 20-year highs. However, when adjusted for
inflation, it is clear that gasoline prices still have far to go before
they reach the inflation-adjusted peak of $3.07 that occurred back in

click for larger graph


Source: Chart of the Day

The biggest equity impacts so far has been twofold: it has put a damper on sales at retailers of the most price sensitive consumers — Tthat means the bigger discounters (Wal-Mart,Target, Kmart, Kohls, etc.).

Second, sales of the largest and most profitible SUVs are slowing. This has a disproportionate impact on GM and Ford. I’m not sure what the net net is on an individual (consumer) level; if you own a large SUV, I expect you will be disappointed at what you can sell it for, as long as gas stays near $2.50 per/gallon. Now consider all of the SUVs which have been leased over the past 3 years: Dealers will soon have a glut of them on their lots, if they don’t already, as lease renewal/extensions and trade ups slow.

After years of marketshare gains by Trucks/SUVs over Cars, sales may well shift back from the large inefficient Trucks towards smaller relatively more efficient Autos. (Where are CAFE standard improvements when you need them?) This presumes gas merely stays near $2.50; If it creeps towards $3, this will accellerate. And that plays into the product lines of Toyota, Honda, Nissan, Mazda, as well as VW and Hyundai. 

Its almost too obvious to say, but it bears repeating:  The price of Gasoline will continue to impact the macro economy and the post recession recovery for the foreseeable future . . .

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  1. David Bennett commented on Apr 6

    I would be interested in the chart going back to 1970. It was the 1973 increases which combined with other factors (including Nixon’s wage and price controls) to create an economically troubled decade. I also believe one positive current factor is that we use roughly half as much energy per dollar of GNP as we did in that era, but I also believe our industrial rivals use half of that. Emerging nations use less which does not bode well in an increasingly competitive world economy. With the ratio of health care cost being roughly double of that of other industrial nations we seem to have a high overhead.

  2. Jack K. Miller commented on Apr 6

    Where are CAFE standards when we need them? We don’t need them! Just like Greenspan said yesterday we need congress to avoid interfering with market forces. CAFE gave folks a false sense that the government was taking care of them. Individuals must learn to take care of themselves. CAFE standards of the past became something to get around by buying trucks instead of cars. Had we never had CAFE the big truck phenomenon would never have developed. At $75 to $90 per tank, learning is done quickly.

  3. dark1p commented on Apr 6

    I don’t agree with Mr. Miller, either in his dismissal of the concept behind the CAFE standards, or of his inference that Mr. Greenspan is an expert in any of the topics he pontificates about, including the economy.

    CAFE standards were not the problem, but rather the manner in which our government kowtowed to both the auto industry and the UAW in setting them. What should have been made into law was a *per vehicle* minimum, with a different standard for the over-8,500-pound set. The fleet average was actually the main villain here, not the idea of mpg standards.

    ‘Individuals must learn to take care of themselves’ is not a healthy prescription for any society. Sometimes it is necessary for duly elected leaders (hence, the term ‘leaders’) to think beyond the everyday and often short-sighted mindset of many people. No knock on the average Joe, but it’s not easy to focus on the big picture when you have bills to pay, kids to feed, and no time to educate yourself thoroughly about all of the issues. This is one large reason why we have governments and elect representatives, who supposedly then have the time to dig into the facts on a far deeper level. (Not that facts always drive our leaders, especially today, but nothing’s perfect.)

    Not all American colonists were in favor of independence in the late 18th century. We don’t having polling figures, but I’ll wager that a hefty percentage of the populace leaned more toward the status quo, yet that is where the leadership of the time took us.

    As for market forces, not only are they are incapable of deciding between right or wrong and good or bad, but they have historically often been trecherous when left unchecked. Unfettered market forces led the country to monopolies, market manipulations, child labor, slavery, the 6-day workweek, deadly tenements and rampant pollution of our environment, just to name a few. Government intervention saved us, or at least tempered the problems, in every case. Pure capitalism is untenable in a societal sense, and leads to strictly dollar-based decision making. Sorry, but some things are more important than that and I believe a true national energy strategy is one.

    I agree that high gas prices are the best teacher of individuals, but that totally abrogates our leadership’s responsibility to try and protect the nation from unnecessary vulnerability. Our massive vulnerability in this one area has led to a number of warped political and military decisions regarding the Middle East, under both Democratic and Republican administrations and Congresses. It has also given undue power and influence to major oil companies, who otherwise would have a more proportional position in our country.

    This situation has, in part, continued precisely because the CAFE standards were chickensh*t and our government never actually put into practice the lessons the ’70s. Of course, with some very notable exceptions, our government has historically caved in to the status quo and backed away from the national interest — due in large part to the ‘market forces’ of huge political contributions from those corporations and individuals whose interests are served by ‘more of the same’.

    There are issues where it is necessary and even morally demanded that a government act with greater wisdom than many of those who elected it, and elicit public support through education, reason and fact-based argument (rather than, say, ideological propaganda, fear-mongering and misrepresentaion, the hallmarks of the totalitarian). I think that defines leadership.

    Giving that up completely to market forces, while gratifyingly simple and fashionably Libertarian, is a facet of the mob rule that the Founding Fathers were so decidedly dead-set against.

    P.S. No, I’m not a Republican, at least as that party is defined today. Let’s just say I’m a mid-70s Republican. Ah, it seems like only yesterday…well, the wheels turn and the cycles come and go.

  4. EagleSpeak commented on Apr 9

    The Big Picture: Gasoline Prices Adjusted for Infl

    Unremarked on is the fact that increasing oil prices also spurs new exploration for oil and allows for development of fields and locations that are economically not viable at lower prices, as I have said before, you can do many things with oil at $80…

  5. Lee Baker commented on May 11

    As an ecologically sound system of clean-ups occur, and the new emerging Chinese economy is flourishing
    We all are liable to see about the same production as happened in the post 1981 high prices. The result with many more people and larger economical impact is that we will pay for the privilege of being able to drive fuel inefficient cars that we allow the auto makers to build for us, and see that we are not using our resources wisely enough to make oil last beyond the next century. Our need to produce 50-70 MPG vehicles are here, in the 1980’s the cars were just beginning to be fuel efficient. Let’s all try to remember that fact and rely on ourselves to conserve. Who knows we might even decrease our own debt a little.
    Lee Baker |May 11, 2005 5:35 P.M. MDT

  6. Steve commented on Aug 15

    Hi folks,

    Could someone please provide some insite on the mechanics and data that went into charting the Gasoline graph, and by adjusting the inflation back to 1981 how they arrived at $3.07?



  7. Robert Schwartz commented on Aug 17

    CAFE is a joke, a finger in the eye of the automotive industry, but it is not a serious energy saving policy.

    CAFE only affects new cars. The average vehicle lasts 17 years, therefor, the total fleet of vehicles turns over at the rate of ~6%/yr. You could up the CAFE requirement to 40 mpg for all classes of vehicles tomorrow and not have a substantial impact on fuel use for a decade.

    Second CAFE only affects vehicles at the time they are sold. How they are used is not affected at all. Since most fuel consumption comes from use decisions, CAFE is bootless. A major use of cars is commuting, most often alone to work. Without a little CAFE car, you might decide to move closer to work, with one you might buy that place twice as far away. Further CAFE may inhibit people from buying an appropriately sized vehicle which might cause them to make more trips thus defeating the purpose of CAFE.

    The only policy that can reduce automotive fuel consumption is a stiff gasoline tax. You don’t have to favor it. but, CAFE is not an alternative.

  8. Vomit Launcher commented on Aug 23

    I like to compare gas prices with the price of boneless skinless chicken breasts. The prices seems to have nearly doubled since the mad cow scare. Does anybody care that it costs about $2.50 a breast? Apparently not, because Fox news hasn’t had a feature on it yet, though they do “pump patrol” every night. I want “chicken breast patrol!”

  9. Doug Merrill commented on Aug 26

    First time reader & enjoyed! keep up the good work & let the readers know how to impeach G. Bush quickly, this man is so dangerous & deceptive along with his crime family.

  10. tina commented on Sep 2

    which cities and state have gasoline prices as high as $6.00?

  11. Tdixon7210 commented on Sep 13

    What folks fail to realize is that “inflation” does not affect commodities such as gasoline. This is just the big guys way of conditioning the public to be happy with $2.50 a gallon prices. Once it gets back to this price, we will feel relieved. There was no reason what so ever for prices to skyrocket due to Katrina. Katrina did not raise the cost of production 1 cent! In fact, I am from MS. I work in Houston, TX. I travel every other wkend back home. I have been to the hurricane ravaged area twice in the past 2 weeks. If Katrina put the companies in such of a bind, why is gas in Houston, (my starting place) $2.87 to $2.99 for the cheap stuff, and in Port Allen, LA and parts of MS it is only $2.49? In places in MS where the damage was bad, it never got over $2.67 per gallon. It takes days to even get into some of these places, so it seem to me prices would be higher due to the obstacles in getting it to them. A lot of stations in MS and LA ran out of gas several times due to delivery impacts. Their prices didn’t go up much at all. Why was gas way up 2000 miles away? It is just another excuse. I heard on the radio an “expert” explain why the increase, and one reason was that the power was out in a lot of places. OHHHH PLEASE! Most all refineries generate their own power Mrs Expert!!! The general public doesn’t know this, so now since an “Expert” said it , and they heard it on the radio, they are convinced. I have worked in the refinery/chemical palnt environment for the past 25 years. These guys have been making excellent profits the entire time. Even when oil was 25.00 a barrel. Now they are making even more profits! I can not see any reason that the oil companies should continue to rape the public so they can live like kings. It seems funny that OSHA and the API are constantly on these companies behinds to upgrade and repair their facilities. Where do you think these profits are going? There haven’t been any new refineries built in 10 or more years in the US. The number of refineries we have has been slashed by at least 50% over the past 20 years. Anyway, I could go on for hours voicing my opinion, truth is until the general public stands up and let’s their voice be heard through protest, picket lines or whatever, nothing will change. Don’t expect our elected officials to do anything. They are reaping some of the rewards themselves! There should be another Boston Tea Party so to speak if we want to change it. Problem is, we are so involved with all of the bullshit we have to do daily to keep our heads above water, no one has time to voice their opinion. By the bullshit I mean, all of the loans most folks are burdened with, it is a strugggle for most to just get there bills paid on time. Most folks work 6-7 days a week to keep up due to the taxes, insurance mortgages, car notes and all of the other bill we have. I don’t know how anyone working for minimum wage can make it these days. Especially if they own a car and have to buy gas.

  12. Jeff commented on Oct 26

    Why take 1981’s prices and inflate it using 24 years of inflation and compare it to today’s prices? This is the most ridiculus statistical calculation. Does that mean in 2025 you will adjust today’s $2.50 using 20 years of inflation and make us comfortable in paying $7.00 a gallon compared to today’s $2.50 adjusted for inflation 20 years out?

  13. Barry Ritholtz commented on Oct 26

    The idea is to show inflation adjusted Petrol

    What date do you start with? Whats’s the frame of reference?

    If you dont inflation adjust, you are comparing apples to oranges . . .

  14. Don commented on Oct 30

    I am so sick of the “Inflation Adjusted ” price. what a misleading peverse view. Just as all the other comments state. Why don’t you at least do it for the last 3 or 5 years just to give a look of trying to have a little fairness.

    The CEO’s and these companies are literely taking their profits out of the mouths of children. The whole damn country will go into a depression as a result of this kind of corperate theivery.

  15. Barry Ritholtz commented on Oct 30

    Um, no.

    You are incorrect in too many ways to detail here.

  16. Joan commented on Feb 12

    Can someone explain to me the difference in gasoline inflation in 1974 and 2005. I can’t seem to understand the economic reasoning. I do know that there was a shortage of gasoline in 1974, but there doesn’t seem to be a shortage in 2005?

  17. Ms. Terry Mann commented on Apr 21

    the shortage was intentional, so we’d believe in the energy crisis and pay the higher price. they always have to have an excuse to bump up the prices, like Iraq invaded Kuwait or Hurricane Katrina or any kind of trouble in the middle east. it’s all a scam, it’s all lies, so you the bovine masses will just keep your head down and your wallet open instead of screaming in the streets. propaganda=profit

  18. Barry Ritholtz commented on Apr 21

    Uh, wrong again.

    The shortage — tight supplies is more accurate — is due to a combination of factors, ranging from War in the Middle East to China’s 10.3% GDP to Katrina & Rita hurting refinery capacity.

    Its the White House’s interest to keep gas prices low — and they don’t seem to be up to the job . . .

  19. Cathy commented on May 4

    Why doesn’t most of the highest politions promote the corn based ethonol. It is a more efficient burning fuel. better for the envirement. We can grow it in the US. and not be “addicted to oil” Why can’t it be that the united states, become a law that we make our own fuel in this country which keep prices very low and leave the other countries out of it. Why, Why,Why,Why

  20. badjesse commented on May 5

    for the whiners out there, it works like this. the U.S. has the world’s largest economy BECAUSE for 50 years we were the world’s largest oil producer. we got USED TO cheap oil and natural gas (and gasoline) and lazily never bothered to seek other sources. the rest of the world is addicted to oil too but not as badly. inflation DOES occur, and to compare properly you can just compare housing prices, the cost of Harvard, average income, average rent. movie tickets, postage, etc. and you’ll see how prices have CHANGED over the years. Some years gasoline has been very cheap, and then it catches up quickly. travel to ANY major industrialized country (Britain, France, Germany. Japan, etc.) and you’ll see them paying a LOT more than $3.00/gallon. thank you.

  21. BeN commented on May 21

    Your point is moot, Cathy. You cannot fairly compare fuel prices in Europe and the United States – Europeans pay more for gasoline (upwards of $6 to $7 per gallon, converted to our currency) because of taxes. The world price of petrol is basically the same, but European governments have put huge taxes on it to encourage mass transit.

    Hence you see lots of jellybean sized cars, often with more fuel efficient diesel engines (european diese l fuel has fewer impurities, and is exempted from gasoline taxes).

  22. I.Lastdance commented on May 31

    As a matter of your own conscience – if you are not allowed to post this.
    Send it along snail mail – to those people, who will have a deep concern and need for it.

    Why is it, that people think : That oil is needed to run a combustible engine.

    Most Likely – because the American people, have been indoctrinated to think this way.

    Why is it : that the formula for gasoline, has always been considered an : Industrial Secret.

    Why is it : A government agency doing an investigation. Into the possible illegal activities of the oil industry.
    Concluded the investigation saying : ” They had found nothing wrong.”

    What they didn’t say was : ” Since the formula for gasoline is an : Industrial Secret.
    They could not make a competent, intense and complete investigation.
    Therefore : They could not come to a conclusion.”

    That government investigation committee : Did nothing more – than to echo.
    What they had been instructed, to say.

    (Telephone conversation with an oil executive – 2003)

    Question : Why are oil prices so high?
    Answer : I don’t know. We don’t set, the price of our oil. A committee in Texas, tells us the price, we will charge for our oil.
    If we don’t charge the price we are told to. The big guys, will put us out of business.

    Question : What is the cost, to refine oil?
    Answer : The cost is very minimal.

    Question : How much does it cost, to pump oil, out of the ground ?
    Answer : Oil is not pumped, out of the ground. They use steam, to force the oil up, out of the ground.

    Question : I don’t understand, what do you mean – ” force the oil up, out of the ground?”
    Answer : Steam is forced – into the ground. The steam – being as hot as it is. Turns that oil sludge, into a thin liquid.
    Because the steam, is heavier than the liquid oil. It forces the oil up out of the ground.

    Have you ever seen a news clip. Where a valve is opened and water runs out?
    That’s – the steam condensed back into water.

    Question : Then what is the real cost, of getting oil, out of the ground.
    Answer : The cost is next to nothing. Think of ocean oil riggs – plenty of pressure – plenty of water – plenty of natural gas.
    Free for the taking – The cost is next to nothing.

    Question : On the news media. Why do we always see, these Texas oil riggs pumping oil?
    Answer : That’s just propaganda. Given to the news media. In order to be feed, to the American people.
    This makes people think, that there is a high cost, to get oil of the ground.
    The real cost is next to nothing.

    Question : Is there really an oil shortage?
    Answer : There is no oil shortage or crises. They got more oil, than they know – what do with.
    The only oil shortage occurs – is – when they turn off the valves.
    As far as I’m concerned : There never – has been a oil shortage.
    There never will be – an oil shortage.

    Question : How much should a gallon – of gasoline cost ?
    Answer : Silence ………. (The telephone conversation now turns, to a different subject matter)

    ——–Read On ————-

    In 1917, John Andrews approached the US Navy with his claim that he could convert fresh or salt water into a fuel with the same power as gasoline. The chemical costs were about 2 cents/gallon.

    Andrews was allowed to demonstrate his invention at the Brooklyn N avy Yard, where a motor boat was fitted with a dynamometer for the test. Commander Earl P. Jessup, who was Captain of the yard, said:

    “We gave Andrews a bucket of water drawn from the Navy Yard [fresh water] hydrant by one of the yard attaches. He got into his car with a gallon can which we inspected and found to be empty and a little satchel he carried with him. In about a minute he handed out the filled can which I personally carried to the open fuel tank. While pouring the liquid into the tank, Andrews held a lighted cigarette close to the liquid, which did not ignite. That showed it was not gaseous or inflammable at that part of the demonstration, which to me was most important. The engine caught just as quickly as it would have done with gasoline, and after a moment’s adjustment of the carburator, it settled down to its work, developing 75% of its rated horsepower, a remarkable showing with any fuel with so slight a readjustment of the carburator”.

    In a second test, Andrews was put in an empty room with no possible way to get rid of the bucket of salt water with which he had been supplied, except to empty it into his one-gallon gas can. Commander Jessup said:

    “In a minute he emerged with the can filled, and the engine again used it up, no difference being noted between the salt water and fresh. Besides myself, Rear Admiral G.E. Burd, the Industrial Manager of the yard, was present and with the precautions we had taken — our own Navy engine, tank and carburator and our own men supplying the water — there was no possibility of deception.

    “From a military viewpoint, it is almost impossible to visual”ze that such an invention means. It is so important that we have hurried an officer to Washington to make a report to the navy Department. It is obvious that Andrews has discovered a combination of chemicals which breaks down water to a form that is inert until mechanically vaporized by the carburator, when the spark causes it to burn as gasoline burns”.

    Walter Meriwether, the Navy editor of the New York World, met with Andrews at his home in McKeesport, PA. Andrews was extremely paranoid. He said:

    “Somebody poisoned my watchdog last week. The only reason my dog was poisoned was so somebody could get at me more easily. I am being followed everywhere, day and night. A lot of people know about my invention — how it will put every oil company in the world out of business. Two cents a gallon for a substitute as good as the best they can refine? I tell you, my life is not worth that [snapping his fingers]! Think of what my invention means to nations at war”.

    Meriwether offered to arrange for a thorough test of his invention with the Navy Department in Washington DC, and Andrews accepted his help. Meriwether managed to arouse the interest of Secretary Josephus Daniels, who said:

    “Tell the man to come on at once; I will have a submarine and airplane detailed and ready for him on his arrival”.

    Meriwether telegraphed Andrews, but received no reply. He returned to McKeesport, but Andrews could not be found. Meriwether then accompanied the police to Andrews’ home, where they found signs of a violent struggle in the ransacked house. No trace was found of Andrews.

    But Andrews had not been kidnapped or murdered; he had simply reported back to his seaman’s post in the Canadian Navy. He returned to the USA in the 1930s. In 1942, a reporter named James Kilgallen found Andrews living on a farm near Library, Pennsylvania. Andrews said that he had forgotten the formula.

    Another version of the Andrews mystery states that he was found murdered in his home in 1937, and all of his notes and supply of green powder were missing. His sister allegedly took the notes and fled to Scotland, where she too was murdered only a year later. The eminent journalist Tom Valentine, who has written numerous articles about suppressed technologies, once received a phone call from a man who claimed to be John Andrews, Jr. His innuendos could not be proven, of course:

    “My aunt was killed and then some of my relatives suddenly got rich and I believe the process for making the powder is known and the people who know are the Phillips Petroleum Company”.

    The next person to demonstrate the conversion of water to fuel was Guido Franch, a former coal miner who tried for nearly 50 years to find financiers for his product. He too used a green powder to turn water into 105-octane fuel. He called it “Mota”, which is atom spelled backwards.

    Franch demonstrated Mota hundreds of times, but never produced it commercially. He did, however, sell about 3000% of his rights to interested investors. In 1973, Franch was subpoenaed to appear in Chicago’s Federal Circuit Court “with any records relating to the purchase or the proposed purchase of any fuel, fuel powder, or fuel formula in your possession”. He demonstrated his Mota transmutation in the presence of judges William Bauer and Philip Romiti, who believed what they saw, and Franch was acquitted of charges of fraud.

    The fuel is produced with one pound of the reagent in 50 gallons of water. It burns clean and leaves no residue. In one demonstration with a lawnmower, it ran for about 15 minutes on a small amount of Mota-treated water. An equal amount of gasoline lasted only 3 minutes. Mota fuel is very sensitive to sunlight, which will turn it back to water with a white powder residue.

    Gary Bolz, a consultant on carburetion and fuel engineering, was able to test Mota with the help of chemists at Michigan State University and Havoline Chemical Laboratories. Bolz stated:

    “The granules are dark olive green. As they enter water, they dissolve in a string of green, which begins to spread fiber-like throughout the water. As the water begins to react, there is a swirling effect. Reaction is complete in a few minutes. If the crystals are mixed in 1:1 ratio with water, the resulting fluid is highly explosive and can be detonated by a small shock. But it isn’t shock-sensitive when mixed at a normal ratio of one ounce of powder per half gallon of water. The finished fuel is lighter than water”.

    Franch claimed that the manufacture of Mota was taught to him and others in 1925 by a German scientist named Alexander Kraft, who died in 1941.

    Franch received about $100,000 from small investors over a period of 40 years. He used that money to live on, and never manufactured any Mota. He received several serious offers from major investors, but his financial demands were unreasonable and nothing practical ever came of his demonstrations and negotiations.

    It appears that we are obliged to continue burning gasoline until some genius rediscovers the secret of extracting green crystals from coal.

    If anyone should choose, to do a cost analysis of gasoline since 1952 to this present-day.

    The formula should reveal : The oil companies should be cutting each others throat for : fifty to fifty four cents ( $.50 to $.54) per gallon of gasoline.

  23. metreomon1 commented on Jun 20

    Excuse me for my English. I live in Ukraine and this very large problem for us. I do not know that will be in winter. But to all appearances, it will be very cold.

  24. Metroblogging Portland commented on Jul 20

    Beating the Heat or Just Beating Your Meat?

    This week marks the Portland release of Who Killed the Electric Car?, another in what seems like an endless series of documentaries and stories and wars that indicate the end of the world is nigh. This specific story is about…

  25. CJ commented on Sep 1

    Iwant to examine the causes of the price changes over a three year period

  26. CJ commented on Sep 1

    Iwant to examine the causes of the price changes over a three year period

  27. cj commented on Sep 1

    examine cost push inflation of gasoline from 2003 to 2006

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