Gas Price: We've Had It Good for a Long Time

The chart above was created using inflation-adjusted gas prices from the Energy Information Administration from 1919 to 2008, along with the overall trend line for gas prices over the last 90 years. A few points:

1. The trend line shows that real gas prices (2007 dollars), started from a price slightly above $3 in 1919 and in general, on average, declined by a little more than 1 cent per year to about $2 in 2008. Obviously, gas prices are now way above the trend, but the general trend for the last 90 years has been steadily falling gas prices.

2. Real gas prices in 1919-1922 averaged $3.08 per gallon, higher than the average price so far this year of $2.98. And real GDP per capita today ($43,000) is about 6.5x higher than in 1919 ($6,675). In other words, adjusted for differences in real income, our ancestors in 1919 paid the equivalent of about $20 per gallon!

3. In the 69 years since 1940, real gas prices have been below the historical trend in 57 of those years and above the trend for only 12 years.

Bottom Line: Despite today's high oil and gas prices, we've had it pretty good for a long, long time, with a long-run historical, 90-year trend of a decline in real gas prices.

Update:

The chart above shows the significant increase in fuel efficiency over time, based on "miles per gallon (m.p.g.)" data from the EIA (Figure 23) for passenger cars. Compared to 1973, when the average passenger car got only 13.4 m.p.g., fuel efficiency increased to 22.9 m.p.g. by 2005, a 71% increase in efficiency in a 32-year period!

Comments

[Cheap:]

The genie is now out of the bottle and if the car companies won’t start making these cars right away, we as American citizens will.
Once you watch these videos, please share them with everyone you can before they get pulled. Make copies if you know how. I did it, so can you.
100mpg is real
video.google.com/video...
150mpg SUV is real
www.youtube.com/watch?...
Why are the car companies not making them? I have driven a 100mpg car for about a year now using wind energy. Last one.
www.youtube.com/watch?...

2008 Mar 08 07:54 PM

[TA:]

In 3 years plug in hybrids will be on sale. After that let China pay the idiot prices, we will no longer give a rats ass.

2008 Mar 08 09:49 PM

[Danl:]

Looks like the right chart can mask anything

2008 Mar 09 10:20 AM

[Robert Prit...:]

Diesel prices are killing off Indie Truckers. Factor that into your "trend".

standeyo.com/NEWS/08_U...

2008 Mar 09 10:59 AM

[simplesimon:]

I spent a summer in Norway 4 years ago, and was stunned by the $7 a gallon gas. And too, the universal health care which was not free, considering the 25% tax on everything, sales tax, income, imports. I then realized the points made above - that the dollar is essentially worth a dime, adjusted for inflation. In a sense, we are back to 35 cents per gallon, so to speak; and 20K for the average home. "Starting over" would be a possibility, were it not for the fact that we now have no industrial base. Two 'hopes'? We can still provide food for the world-and possibly renewable energy systems -e.g. wind, solar, geothermal, methane. Let us all hope for some visionary leadership now. Meanwhile, in view of the above, GE (wind energy success) is trading for $3.20 a share, so to speak! There are some good buys. I'd stock up on these before the sovereign investors do, and won't sell them back!

2008 Mar 09 12:02 PM

[richandmer:]

It makes me wonder why our government and the presidential candidates have not made energy one of the most important issues of the day. We cannot continue to set the high cost of energy aside for our grandkids to figure out. We all sit and talk about the problem, but little is being done.

If peak oil has been hit and energy prices go up from here, the world is in trouble. A recession could easily turn into something much worse. Thinking about the future with ever increasing energy prices is very scary. The only scenario to save the day appears to be if we get LUCKY and find new fields, open new areas for development, develop new technology, etc.

2008 Mar 09 01:20 PM

[wriglee1:]

figures don't lie, liars always figure.
First rule of business success - buy low, sell high.
gasoline consumption has declined for almost a year.
The US government has for sometime and continues to buy oil and gasoline and put them in the strategic reserves while prices have been soaring. the reported shortages are misinformation.
why does the US government tell us one thing (shortages created by rising consumption) and then practice very poor business, with our money, by buying high? how do you spell price supports?

2008 Mar 09 05:00 PM

[Danny Newton:]

The Bureau of Transp[ortation Statistics has lots of data on the cost of automobile ownership. It only goes back to 1980 but the fixed cost of automobiles like financing, depreciation and registration has been rising at a higher annualized rate than the cost of gasoline. The amount of household income that people are willing to spend on transportation is about 11.3 percent. It is amazingly consistent no matter who is president or what is happening in the economy. GDP is rising at a higher rate than household income however. This is going to prevent substantial investment in new technologies and sets up resistence to higher transportation taxes. To cope with the increasing cost of automobile ownership, people are keeping their cars longer. From 1990 to 2006, the median age of an automobile went from 6.5 years to 9.2 years.

2008 Mar 09 08:15 PM

[jhm47:]

Housing crisis? You bet! Interest rates too high for people to make their payments? Only part of the problem. High energy prices are the cause of the current "housing crisis". Since America is totally dependent on transporting everything we use from point "A" to point "B", and the cost of this transportation has doubled, inflation was certain to creep up (farmers have to transport fertilizer from their suppliers to their farms, tractors have to spread the fertilizer and plant the crops, combines have to harvest the crops, the crop has to be hauled to market, it is then hauled to the processor, then to the retail distributor, from there to the retailer, and finally the retail customer has to drive to the supermarket to purchase the final product). Since the price of fuel has tripled, the cost of each of these steps has about doubled. This is the major cause of the housing crisis, NOT interest rates. If the $ that the average American now spends on fuel, and could use the difference in $ that virtually everything that he purchases to make his mortgage payments, we wouldn't have a "housing crisis".

And---the trillions of $$$ that we are sending to the middle East for oil is now being used to finance terrorism against us. We are being destroyed from within by our own government policies.

2008 Mar 09 10:20 PM

[wheels14:]

The chart on pasanger car mileage is nice, but it does not include the SUVs americans have been buying. I would like to see a chart on how many passanger cars have been sold as a percentage of vechicles sold. I am assuming passanger car sales are climbing due to the price of fuel. Who cares what the fuel efficiency of cars are if mosty american buy an SUV.

2008 Mar 10 03:04 PM

[Conservativ...:]

The fact that sweet crude takes an average of twenty four to
forty eight months to actually hit the pumps in the USA. The american
consumers are being educated by the oil companies that a dramatic
increase in oil pricing SHOULD be refelected at Your gas pump within a week. America has not manufactured a new refinery in over 20 years.
DRILL OFFSHORE AND IN ALASKA. BUILD NEW REFINERIES- GO NUCLEAR! (EOS)

2008 Mar 10 09:09 PM