The Price of Gas

Over the past few, I have driven probably around 1,000 miles. That driving included traveling to Richmond, VA and then back here to Syracuse again. Luckily my car gets excellent gas mileage (usually around 35 mpg if it is on the highway the whole time). All this driving and filling up the gas tank several times got me thinking about gas prices. I have heard at least once or twice that the price of gas, as disgustingly expensive as it is, is actually low if you you factor in where it has been historically and then scale up the price for things like inflation. So I had heard that and always wondered if it was true. Since gas is something that everybody needs and uses on a regular basis I would be glad to learn that gas has not risen as much as inflation would normally cause something to rise, but I have never known for sure whether or not that is actually true. Coincidentally I am also working on a group project in school for a class about US foreign policy and national security. I was assigned to work on doing research on our country's energy policy. So I have been doing a little research on a few things and have found some interesting figures. This graph that I have posted shows the actual nominal price of gas since 1919 and then shows what that would be after adjustment for inflation. Interestingly, gas in 1919 was like3 dollars a gallon or something like that. Since 1919, with lots of ups and downs, the price of gas was actually decreasing until around 1999 or so. It spiked up and went down a little until around 2003 it looks like and has been going up through the roof ever since. I will continue to post things I have found in my research that I think are interesting. I will also try to figure out why the gas prices have been rising through the roof since around '03. If anyone know let me know.

the graph I posted along with some other graphs can be found here: http://www.eia.doe.gov/emeu/steo/pub/fsheets/real_prices.html


Just to give a quick explanation of the rising gas prices since 2003, i looked it up on Wikipedia (obviously not the best source of information and some say not even a good source of informaiton, but it has almost everything and is really easy to find) and here is a few paragrpahs directly from Wikipedia:

"From the mid-1980s to September 2003, the inflation adjusted price of a barrel of crude oil on NYMEX was generally under $25/barrel. Then during 2003, the price rose above $30, reached $60 by August 11, 2005, and rose above $146 in June 2008. Commentators have attributed the price increases of this period to a confluence of factors, including reports from the United States Department of Energy and others showing a decline in petroleum reserves,^[1] worries over peak oil,^[2] Middle East tension, and oil price speculation.^[3] Some events have had short term effects on oil prices, such as North Korean missile launches,^[4] the crisis between Israel and Lebanon,^[5] tension between Iran and U.S.,^[6] and "a hundred factors."^[7]

At the start of September 2008, with prices having fallen back to $110, analyst Jan Rudolph said that "weakened economies" and record high prices had reduced demand worldwide. He pointed out that the oil market had changed fundamentally in 2008, and was not sensitive to price spikes from events such as Hurricane Gustav and the Russo-Georgian war.^[8] In response to falling prices, OPEC declared it was prepared to take action (such as coordinated reductions in supply) to maintain prices near $100.^[9]

Prices near $95–105 per barrel (2007 U.S. dollars) are equal to the previous all time inflation adjusted record of 1980.^[10] This had been clearly exceeded by the first quarter of 2008. In terms of the crude price, U.S. records suggest that equivalent prices were last seen in the 1860s.^[11] In terms of refined petroleum products, similar prices in real terms have not been seen since the 1920s.^[12] Outside the U.S., the history of both inflation and oil prices will be different, but after being adjusted for inflation, prices over $120/barrel are unprecedented since the very earliest days of commercial oil production. Sustained high prices contribute to fears of an economic recession similar to that of the early 1980s.^[13] In the United States, gasoline consumption dropped by 0.5% in the first two months of 2008 in response to higher prices,^[14] compared to a drop of 0.4% total in 2007.^[15]"