Copyright 2021 - The Energy Show, Barry Cinnamon
My wife filled up her car, it cost almost $100. The local price of gas in San Jose California is close to $5/gal. Now we all know that prices in California are crazy high but according to triple A, the average price of gas around the country is $3.42. The issue about gas prices is we see gas price signs at filling stations so it's in your face information and even if you are not buying gas, when you see that number approaching $5/gallon it’s a big shock.
But looking into gas pricing, the reality is that gas prices have been rock stable on an inflation adjusted basis for over 30 years.
In 1978, gas prices were $2.44/gallon on an inflation adjusted basis. In 2020 which is the most recent full year of gas, the average gas price was $2.24/gallon. So it went down $0.20 from 1978 to 2020 on an inflation adjusted basis.
Over the last 30 years, the average gas mileage of a car has gone up from 15 mpg in 1978 to 25 mpg in 2020. So, on the average, based on inflation adjusted average and mileage/gallon, it cost $0.16 per mile to drive in 1978 and $0.09 per mile to drive in 2020.
Even at the U.S. average price of $3.42/gallon, it is still cheaper to drive a car per mile in 2021 than it was in 1978.
While we say that gas prices have gone way up, they have gone up in relative terms but in absolute terms, not really. Still the prices are higher than they were and that takes money out of people’s pockets and it is bad for the economy.
Unfortunately, not only have gas prices gone up but natural gas prices are up too. Home heating costs in the US will be higher this year and since a lot of electricity is still generated by natural gas, electricity costs will also go up a bit at utilities that do not have a lot of wind and solar. All of these increased costs means that average consumers have less money to spend on other things.
To learn why gas prices are so high and how to cope with the ever-increasing costs, please listen to this week’s Energy Show.
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