Gas Price Horror Strikes Again

A car that cost $30,000 in 2010 would have cost about $12,000 back in 1981. I learned this from a Web site called The Inflation Calculator, which I highly recommend to anyone obsessing (again) over the cost of a gallon of gasoline.

It’s baffling. A loaf of bread that goes for $1.29 now was only 55-cents in 1981, yet I haven’t seen any headlines lamenting the record price of that commodity, nor have I heard any calls for the government to step in and do something about the rapacious tactics of Big Bread, or to saddle it with a “windfall profits” tax, as was being proposed during the last gas-price obsession and doubtless will be again -- a tax which would, of course, have the effect of raiding the college or retirement savings of millions of ordinary Americans who have invested in oil stocks, without reducing the price of gas by a penny.

With some exceptions – electronic gizmos, for example – everything costs more than it did in 1981, and the rate of increase for gasoline hasn’t been, generally speaking, any higher or faster than it has been for anything else. And I pick 1981 because that year, gasoline was the most expensive, until very recently, it has ever been: $1.36 a gallon, which would be $3.21 today. Even with the latest price spike that threatens to send media outlets into another gas-price frenzy, the outlay for gas as a percentage of disposable income, the only measurement that really matters, is roughly the same, now vs. then. By contrast, the costs of health care and a college education, as just two examples, have long since left normal inflation rates in their rear-view mirror, and the percentage of disposal income they soak up is something approximating disastrous.

Yet, the outrage is directed at oil companies, spawning, among other things, congressional hearings that put oil execs in the dock so preening politicians can take potshots at them, television news stories in which we see angry consumers expressing shock and horror at the outrages being done to them, and silly Internet schemes involving one-day gasoline boycotts. Go figure. And the interesting thing about gasoline, as opposed to, say, bread, is that the price of gasoline may well be considerably lower by next week, next month, or next year than it is today, because the price of gasoline does that – fluctuates. And so, it will again be cheaper than it was more than a quarter of a century ago.

It’s hard to say what makes Big Oil such a lightning rod. Maybe it’s the popular perception of the industry as being under the control of some Master Manipulator who moves the price of gas up and down according to whim, as distinguished from the reality, which is that gas prices are buffeted about by a complex set of market-driven circumstances mainly involving perceptions of current and future availability. Moreover, the oil industry operates on profit margins that are not particularly high – lower by quite a bit than, for example, the pharmaceutical and financial services industries. But because Big Oil sells a heckuva lot of gasoline, those relatively small profit margin dollars add up to a big number.

Do higher gasoline prices weigh most heavily on the poor? Well, yes, of course. Everything weighs most heavily on the poor. But gasoline, as distinguished from any number of other necessary commodities, has remained pretty consistent for the past several decades in the amount of pain it inflicts on the budgets of poor people, and on everybody else, for that matter. In other words, gasoline prices at their current level are no harder on anybody than they were twenty-five years ago.

None of that stops ambitious politicians – is there any other kind? – from firing up the g-word – gouging -- whenever they think they can get some mileage out of it and then demanding that all those greedy 401K owners be brought to heel by confiscating the “windfall profits” they’re setting aside to educate their children.