Real Price of Gas Approaches a Historic Record-Low

Feeling nostalgic for the days of 17 cent gas in 1931, 20 cent gas during WWI, the gas below 30 cents during the first half of the 1950s, or the $1.40 gas of the early 1980s? If so, you'd be suffering from "money illusion," the tendency to confuse nominal and real (inflation-adjusted) prices. Gas is cheaper today in real dollars than any of those past prices.

The chart above displays real gas prices going back to 1919 (EIA data here), showing that the current national average price of $2.12 is below the price of gas during the entire decades of the 1920s, 1930s, 1940s, 1950s, about the same as the average price during the entire 1960s, below the average price during the 1970s, and below the average real price of gas during the entire 1919-2008 period ($2.36).

Note: This analysis compares the current average retail price of $2.22 per gallon (according to AAA) to the average real gas prices (in 2008 dollars) annually for years from 1919 to 2007, for comparison purposes of what American consumers are paying today for gas versus what consumers paid for gas in the past. Also, the EIA data in 2007 dollars have been adjusted here to 2008

Gas is now available in Kansas City for as low as $1.49 per gallon, and the average retail price for gas is now $2.07 per gallon. Using real gas prices from the EIA (in November 2008 dollars), the chart above (click to enlarge) shows how today's gas prices compare to past prices.

The last time real gas prices (national average) were as low as $2.07 per gallon was almost four years ago in January of 2005, and the last time real gas prices were as low $1.49 per gallon was almost seven years ago in February of 2002 (see chart above). Gas prices in Kansas City are within 27 cents per gallon of the lowest-ever real gas price of $1.21 in February of 1999.

The drop in gas prices from $4.12 in July to the current $2.07 per gallon will generate annual savings of almost $300 billion for American consumers and businesses (each $1 fall in gas prices = $142 approximately billion annual savings). Talk about a tax cut!

Comments

[scfranklin94:]

So should I buy an H2 now?

2008 Nov 18 08:10 AM

[pockyclips ...:]

Yeah! But my paycheck isn't inflation adjusted. And didn't we get a $150 billion
tax rebate less than 6 months ago that didn't do squat? More lipstick for this pig,
please.

2008 Nov 18 08:18 AM

[cjct:]

So much for "running out of oil"...I realize that we need to invest more in energy infrastructure but the ridiculous cries from analyst that it's all gone and we're near the end of society as we know it.

2008 Nov 18 11:16 AM

[Dividend Gr...:]

Mark,

I just wanted to say that I really enjoy the historical perspective in your articles.

I never considered the fact that gas prices are in a long term decline..

2008 Nov 18 01:54 PM

[Jack B.:]

Mark,

I agree with cjct, Whereis this HUGE shortage of OIl?????

Good article. It almost makes you wonder if the $5.00 a gallon was all contrived??? Or will the Big Oil companies wait until we (the USA) start to recover and then come up with all kinds of reasons that will cause gas to go up to $8.00 a gallon. Its no surprise to me that Exxon-Mobil had a $16 Billion NET profit for a Quarter??? Amazing! General Motors should have been Exon and then they would not worry about cash.

As a Side note, I sell Trucks and SUV's and sales are picking up(evan without GMAC financing) again now that gas fallen so fast in the last 2 weeks. The big question becomes, how well will all the economical cars continue to sell??? I predict that Toyota will dust off their Tundra's and Nissan their Titans and Infinity will sell their QX 56's again( all of which get worse Mileage then the GM counterparts.) Very strange market that is so dependent on what The Big Oil companies decide to sell their Gas for.

For those of you that do not know, Gm has a Yukon Hybrid that gets 21 miles to the gallon city driving. That beats alot of Honda's,Toyota and Nissan's economy cars. Gm also has 30 count then 30 vehicles that get over 30 miles to the gallon on the hwy. Look at JD power and you will see their quality way up in the top ten. Also who else has a 5 year 100,000 0 deduct powertrain warranty which is fully transferable to any subsequent owner. Gm did not offer this because they thought that they would lose money on it. They did it becauseTheir engines and Tranny's and Rear Ends are the best in the business.....And believe it or not, Not all families in the US want to drive a Prius.. They need room...

Also NOTE THIS: Every recession since 1974 has started when we had either a shortage of gasoline or we had a huge runup in pricing because a bug sneezed at a refinery. All contrived just like Enron. I am so suprised that no one wants to take on the OIL companies for all the Havoc that they have caused with their Enron tactics. Instead we fight about how lousy GM is an how their workers make $72.00 an hour(also wrong). Once we found out about Enron and relized that we had plenty of electricity, The rolling blackouts stopped. Remember how everyones electricity bill tripled because of this illegal activity???
I am afraid that because all the Govt has been bought out by the Oil companies, We will always be at their mercy and will contiue to have recessions based on their Whims. However once we break loose from gasoline, They will deservedly go under. I too am a free Market place advocate, but not when some companies do illegal things that cause other companies to go under....and Slam the country into MAJOR Depression and everyone loses their jobs because Exxon got greedy???

At $150 a barrel all of the "experts" stated we were headed to $300 a barrel. What happened all of you "experts"??? Where are you now to admit that you were so wrong!!! And for those of you that believe that everyone has stopped driving, BS, in California the freeways are still packed........ Just some thoughts on our Fantastic ,Dangerous Oil companies. Why do we not have them Pay for all of the unemployment that they have caused??? And all of the innocent companies that they have put out of business because of their GREED.. Sickening....Remember this :all of you "Conservative Republicans"(of which I used to be)Last time I checked Monopolies and Price fixing are illegal at the Federal Level, So how do the oil companies go unchecked???? This is not a "free Market" of supply and demand,But a huge conspiracy like Enron... Wake up people!! Our worst enemy is our own Oil companies. They have screwed us since 1974 and have gotten away with it. It may be too late..

2008 Nov 18 07:41 PM

[CLH:]

Yes gas is low and the recent rise was a bubble. However, when Obama and the Democrates come in, it will go up to 7 or 8 dollars --mostly taxes to save us from the nutcakes who believe in man caused earth warming.

2008 Nov 18 10:36 PM

[Sober Realist:]

Don't forget about carbon credits that all polluting companies will have to buy and trade. More cost for the public and more money for the government. Remember, Obama wants to have the most stringent carbon taxing scheme. Never mind that China is building 2 new coal-fired power plants every week.

2008 Nov 19 03:22 PM

[X-15:]

Party like it's 1999

2008 Nov 19 07:08 PM

[Bill Peace:]

So can some of you idiots tell me how those big, greedy, monopolistic oil companies that brought us almost $5/gallon gas suddenly lost total control and gas falls to $1.50? You can't have it both ways morons. They are either in collusion/control or they are not.

I guess most union workers and US car salesmen never took (or passed) an economics class.

Keep that UAW solidarity for your grossly inflated wages and benefits and you will eventually be pushing a shopping cart around your hood. Note to union workers with the skills of a zoo monkey - there are millions of unskilled labor that will work for minimum wage and not extort their employers for more.

2008 Nov 19 07:51 PM

[frayser61:]

you guys are on the money with your commentsi I've said all along tha the oil companies and unions were going to bankrupt this country. The auto makers are in washington begging for a hand out one was ask about management change OH! we don't need to change our management. look at all the little companies that have bellied up over this oil and auto mess.
Do you think they could build a reg. car That would get 50 + mpg?
I DO

2008 Nov 20 12:40 PM

[econjunkie:]

I've taken retail gasoline prices for granted as a function of my 1984 birth year. I've never seen an episode like we saw between 2003 and today. I am still paying more today than I saw paid when I was a kid and teenager, given that prices in my area (and Canada in general) have, as per usual, not declined as fast as wholesale prices have. Guess the downstreamers need to claw back at least some of their losses.

M.I.

2008 Nov 21 01:01 AM

[marswind:]

Looks like a good time to tax gasoline instead of income and profit.

2008 Dec 07 12:52 PM