Gasoline

Gasoline

As part of my Masters in Public Administration degree, I took a course on "Economics for Administrators." One interesting fact that the professor made in the class was that fuel costs, especially, gasoline costs generally have not kept pace with inflation. So, while people were complaining about $2 and $3 per gallon gas prices that summer (two years ago) the truth was that, adjusted for inflation, gas prices were still lower than they were at almost any time.

The Kansas City Star reaffirmed this point. The article actually reported, "When adjusted for inflation, monthly average U.S. pump prices have hit that level ($3.22 per gallon) only once in the last eight decades. That was in March 1981, according to the American Petroleum Institute. (The actual cost back then was $1.42 a gallon, if you can imagine. Kansas Citians haven’t been used to that in seven years.)"

What does this mean? It isn't very sympathetic, but honestly, the cost of gas has had the same affordability or been a bargain in recent years. What's the difference? Inflation. While people enjoy railing against $3.00 gas prices and recalling $0.20 gas. However, those folks rarely consider income, or the cost of other consumer goods and services at the same time. I was thinking about this recently. My Dad used to take home about $200 a week in the late 1970s (with double digit yearly inflation). Gas was about $0.75 per gallon. So, given the size of a gas tank, it would cost about $10 to fill a tank, or 5% of his take home pay. I really don't know that current pricing is setting at much more than 5% of take home pay to fill a gas tank. Again, consider that other times with "gas crisises" in the U.S. also involved recession, stagflation, heavy unemployment, and other conditions that exacerbated the problem.

When people wax poetic about inexpensive gas, they rarely discuss about how other goods and services have increased. People also rarely talk about how other "necessities" take pieces of our income. Cell phone, cable/satellite TV, personal computers and internet service, are all new bills that people routinely pay today as opposed to 1980. And, with that money going out for these staples, it will impact the money available to pay for a tank of gas.

Then, there is the cultural issues. We live further from our jobs. In the 1980s, Greater KC stretched to about south 110th street. It's now pushing south 225th St. in Johnson/Miami county. We have to drive a very long way to get anywhere. Or, we have to rebuild a new "city center" as we move further and further from the established areas (e.g. Town Center Plaza, Zona Rosa, etc.). We don't have walkable conditions anyplace...from shopping centers to housing editions, to schools. Due to safety concerns, children don't even walk to neighborhood schools. And, let's not forget about the fuel economy of our vehicles.

Conservatives like to point out the lack of refineries in the U.S. I agree that this is an issue. However, I also think that the lack of new refineries has been much less about ecology and more about economy. If prices had been high enough to justify new refineries, they would have been built and no amount of tree-huggers or Greenpeace protesters would have stopped big oil. It is simple supply and demand.

Don't get me wrong. I really don't like paying for expensive gas. However, I really don't know that gas prices are actually higher than today than they've ever been.