The Cost of Gas

If you had a car and had to pay for gas, you might think otherwise.

I'm not sure I agree with Stossel because his info seems to be at odds with info I have come across. If gas prices stay at their current levels or go up (which they are very likely to do during the summer driving season), the average price in 2007 will be higher than the previous inflation-adjusted average annual price record, which was back in 1980. The inflation-adjusted average price for a gallon of gas in 1980 was $3.06 according to InflationData.com, which takes its info from the United States Energy Information Administration. As of yesterday, AAA and the Oil Price Information Service reports that the average cost of a gallon of gas nationwide is currently $3.14.

from InflationData.com:

"... if prices continue at current levels or above for long enough we will be above the average for 1980.

Put another way... we are very near all time highs in real Dollar terms.

And current prices are spiking higher than the average price in 1980 putting us in position to have higher average prices than 1980."

Maybe I'm missing something here, but I'd like to see the data Stossel was looking at. And I normally trust Stosssel's reporting. I like him. But I think he may be wrong here.

And comparing the price of a gallon of gas to the price of a bottle of water is confusing the issue somewhat. With bottled water (which, by the way, indirectly affects the price of gas due to the petroleum used to make the plastic bottle), you're paying more for the convenience of it than you are with gas. With gas, you can only buy it at one place: a gas station. It’s not convenient or inconvenient: it’s your only option. There's limited variance in price from station to station. You need it, it's a necessity, and if it's considerably cheaper at the station across the street, you'll go there. But with water, you can get it at home, buy it at a grocery store, a warehouse club, a gas station convenience store, a ball game, etc. etc. ... the more different types of places you can buy something, the greater variance in price. (With MWRA rates it may be cheaper to buy all your water at Cumberland Farms) True, water is a necessity too, but you have a choice of where to go for it. You can fill up bottles from home and take them with you everywhere you go. It's rare that you buy water at a convenience station because you are in desperate need of water and have to buy it at a gas station convenience store - but if that is the case then you are paying for convenience. It's not exactly the same with gas. (the exception being gas stations at highway rest stops or right off the highway, or a situation where you're the only gas station for miles around - that's when you see prices that are considerably higher than the average. That's a situation where you are paying for the convenience of getting gas.)

"Price gouging" is not an accurate way to describe the normal pricing of water at gas station convenience stores. It's price gouging when Hurricane Katrina hits and they start charging $8 for a bottle of water, or when the power goes out on a summer day in NYC a few years ago and they start charging $10 for a gallon of water, or when a big snowstorm is on the horizon and all of a sudden shovels are $50 when they were $25 yesterday.


So why is gas so high? Taxes play a role (apprx. $.40 per gal depending on the state), and the price of crude oil has gone up. Refining is expensive and more difficult now that ethanol is required in gas - and our refining capabilities in this country are pretty limited at this point, considering we haven't built a new oil refinery in something like 30 years. But the main reason prices go up is simple: when demand goes up and supply goes down, you (or I) pay more.

And who controls supply? ...

as you say, we are near an all-time high for gas prices - I don't think anyone is disputing that. But the media were saying we set an all-time high...apparently, that's false. Stossel got his data from the U.S. Energy Information Agency (EIA) website.

A point Stossel doesn't make here, but one i think is important, is that gas prices are much higher in Europe than they are here because of taxes. Check this graph out (hopefully the link works):

http://goeurope.about.com/gi/dynamic/offsite.htm?zi=1/XJ&sdn=goeurope&cdn=travel&tm=331&gps=385_522_1020_615&f=20&su=p531.31.152.ip_p531.29.420.ip_p284.8.150.ip_&tt=2&bt=1&bts=1&zu=http%3A//www.eia.doe.gov/emeu/international/prices.html%23Motor

So, despite rising gas prices, relatively speaking it seems like the U.S. isn't in bad shape when it comes to how much we pay for gas.

I think people are accustomed to gas being SO cheap that when the price rises, it induces hysteria. Yes, we'll hear more from the media throughout the summer about gas prices, but if Memorial Day Weekend was any indicator, it won't stop people from making summer travel plans - which says to me that the media hype this story.

The media hype the story - I suppose that is somewhat true. They report on gas prices practically every day now. They have always done stories about gas prices as peak driving seasons are about to begin, so that's really nothing new. Only when the price drops significantly do they report extensively on downward trends, which is rare, as we know because it just doesn't really happen. There was a glut of media stories when gas was so cheap in late 98/early 99 - but I don't think that's hype, that's just reporting on a downward spike. Now they are reporting on an upward spike. But the media's agenda I think one can safely say is that they want to turn public opinion against big oil. The real problem might not only be big oil (which I'm no fan of personally) but our "friends" in Saudi Arabia who control the supply. They can raise or lower the price at their own whim, and I think we are seeing that we are at their mercy to an extent on this issue. Imagine if Iran had the oil and the ability to extract it ...

Europeans certainly pay more because of the downright oppressive taxes. But just because, relative to them, we're still paying less doesn't make me comfortable about the way the prices have gone up. I guess I haven't seen media references to an all-time high having already been hit (may this have been in the immediate aftermath of Katrina? It's possible in Sept/Oct of '05 an all-time high was hit - I'm not sure. I'm unaware of media stories that claim an all-time high was recently hit - can you point to any?).

Tim - Stossel provides the examples. ABC, CBS, NBC, and FOX all claimed record highs in the recent past.

http://money.cnn.com/2007/05/21/news/economy/record_gas_monday/index.htm

?

I will say I care more about the illegal alien amnesty bill more than the price of gas, by a longshot.

But how do you read this paragraph?

"The Energy Information Administration's latest pump price, when adjusted for inflation, also reached a new peak. The EIA said Monday the average price for regular unleaded gasoline soared 11.5 cents over the past week to a fresh record of $3.22 a gallon, the all-time high fuel cost reached in March 1981."

I don't understand the wording...

Also - look at that sub-heading:

1) it says the ninth straight high "in current dollars" which isn't particularly important when comparing costs from 1981 to now

2) it says gas is "nearly $3.20 a gallon" instead of quoting the actual price - so people who don't read the article will think "gas is $3.20 a gallon now" when the Lundberg Survey quotes $3.18 a gallon