Gas Prices at a 90 Year Low

Over the summer, the price for a barrel of oil peaked at $147.27 per barrel. I know we're all supposed to be worry about this, but would you believe that oil just hit a 21-month low?

Crude oil for December delivery fell $2.09, or 3.7 percent, to $54.95 a barrel at 2:42 p.m. on the New York Mercantile Exchange, the lowest settlement since Jan. 29, 2007. Prices have tumbled 63 percent since reaching a record $147.27 on July 11.

Gasoline for December delivery tumbled 6.45 cents, or 5.2 percent, to $1.1746 a gallon in New York, the lowest settlement since the contract was introduced in October 2005.

Pump prices have followed futures lower. Regular gasoline, averaged nationwide, declined 1.8 cents to $2.087 a gallon, AAA, the nation’s largest motorist organization, said on its Web site today. It’s the lowest retail price since March 2005. Gasoline pump prices have dropped 49 percent from the record $4.114 a gallon reached on July 17.

Yesterday's PPI report showed the biggest plunge on record thanks to gas prices dropping by nearly 25%. If we adjust for inflation, gas prices are much lower than they've been for much of the last 90 years.

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.

Comments

[Joe Bolte:]

The headline is wrong. Gas prices are in no way at a 90 year low. Real gas prices were lowest in February 1999.

2008 Nov 19 06:16 AM

[Paul Killinger:]

Of all the necessities in our lives, gasoline is the one we're most emotional about. For those of us who grew up with the stuff, it's hard to understand why some people have come to hate it so much.

With 250 M cars on the road and hundreds of thousands of gas stations (they still open new ones all the time) in America, there's no way we're going to get rid of it anytime soon. But it is true that OPEC gives it a bad rap.

That's why Boone's idea to use NG as a transport fuel makes SO much sense. It's oil's cousin, cleaner, safer, less harmful to the environment, a lot cheaper, and we're swimming in the stuff. Besides, we have enough NG and gas hydrates to run our cars and trucks literally FOREVER.

Even if EV's weren't a bad joke (which they most certainly ARE), there's no way electric vehicles can compete (from ANY viewpoint) with NGV's.

Like the commentator said on CNBC last nite, our politicians who decide these things in Washington are either "wolves or fools." That's our only REAL problem here. But, thankfully, NGV's make too much sense, so one day (hopefully soon!) they'll rule our roads.

2008 Nov 19 10:01 AM

[Pipo:]

But oil is getting very, very oversold. We will see a real rally very soon, and gas prices will go up as well.

oiltradersblog.blogspo...

2008 Nov 19 05:54 PM

[samanaali:]

I do believe that a rally is brewing. The market has gone to two extremes wihting a relatively short amount of time, a record high crude and now down to lows. It has to stabalize at a happy medium.

I like the pickens plan, I know many developing countries have already gone to NG due to necessity. They simply can't afford gas at these prices. One point on EVs, they are still developing. Like pickens says, EVs will be good for smaller 'family' vehicles, however, we will still need NG for larger commercial vehicles.

2008 Nov 20 01:10 PM

[avigoldstein:]

When assessing relative price points for gasoline, we must keep in mind not only inflation, which includes the fact that salaries today are much higher than, say, in 1980, but also the fact that cars today get much better gas mileage on average than in the past.
For example, my first car, a Plymouth Fury, got 9 miles a gallon in the city. My equivalent current car, a 1997 Oldsmobile 88, gets about 14 miles a gallon.
I think the numbers are similar for other cars. If so, then a gallon today buys many more miles than it used to, making today's gasoline even cheaper.

2008 Nov 20 05:21 PM