The Low Cost Of Gasoline
The Real Cost of Gasoline: Get Over It!
Time out for a reality check. Amidst the blizzard of stories about how high motor fuel prices are hurting America and big oil companies are raping consumers, we decided to do some calculations. The graphic below tells the story: current gasoline prices are a bargain. Yes, they are high when compared to prices over the past twenty years or so. But when compared to the entire post-World War II period, gasoline today is cheap, cheap, cheap.
We came up with this chart by combining two sets of data: the constant dollar price of gasoline and transportation intensity. The first metric is easily understood. Transportation intensity is the total energy consumed in all types of transportation. Since 1949, the amount of energy used in America for transportation has been steadily declining when measured per dollar of GDP output.
If high prices were a big cost to the economy, we should see slowing demand. But according to the Energy Information Administration, March 2006 gasoline sales were nearly 375 million gallons per day. That's the second-highest March consumption figure in the EIA database. (The highest figure was March 2005.) Indeed, gasoline consumption numbers throughout 2005 were at or near record highs every month - even with the devastating effects of the two hurricanes.