302. THE REAL SOURCES OF INFLATION
There's a lot of peak oiler hype about soaring food/fuel prices, but that's not where most inflation comes from. The following graph speaks volumes:
Source
As you can see, in real terms, the price of food/gasoline hasn't increased at all over the last 20 years.
--by JD
posted by JD @ 12:19 AM
10 comments
10 Comments:
This is starting to become fun.
And "past performance does not garentee future performance".
Funny that you picked exactly the time frame when oil price was low to make an "analysis"...
It is also interesting to not that despite the current howls of pain, the gas price is just at the lower edge of the levels that prevailed for several years in the early 80s. The inflation adjusted gas price chart is interesting reading, though I wish I had found one that went back farther in time.
The High Costs of Cheap Gas and Vice Versa by David Leonhardt, NYTimes, May 10, 2006:
What really matters to people is the cost of the gas that is needed to drive a mile, a function of both the price of oil and the fuel efficiency of cars. By this measure, gas for the average American now costs about what it did throughout the 1960's and early 70's and much less than in the early 80's.
Gasoline is the only product whose price is displayed on 20-foot-high signs in just about every town in the United States, which is why we get a little crazy when the price of it is rising. But those signs aren't an especially useful way of thinking about the cost of gas, for two big reasons.
The first, more obvious one is that people forget about general inflation. Over time, the price of most everything — milk, blue jeans, movie tickets, health care, life insurance — rises, as do people's incomes, and the increases largely cancel each other out. ...
But the cost of gas itself is only part of the story. The other part is how far that gas will take you. If you think about it, you care about how much you pay to drive 100 miles, not how much you pay for a gallon of clear, pungent fluid.
In the 1960's, when people were buying Country Squires and El Caminos, vehicles were getting just 14 miles to the gallon on average. Gas was cheap at the time, but with all the guzzlers on the road, drivers were still spending an average of 15 cents a mile on gas. (All these numbers are adjusted for inflation.) ...
But the oil crises of the 1970's and early 80's changed everything. The cost of gas spiked, eventually reaching 20 cents a mile, and the government passed a law in 1975 forcing vehicles to become more efficient. Thanks to that law and 20 years of mostly falling oil prices, Americans spent less than 7 cents a mile for gas in 1998. Today, gas again costs about 15 cents a mile for the average driver, which gives the country some incentive to become more energy-efficient. You can cut the cost to 10 cents a mile, for example, by driving a Honda Civic or Toyota Corolla.
Leonhard's argument, although quite true, misses one important aspect. He assumes that the average miles driven per person per car stays the same. I bet this number increased quite a lot in the US since 1960. Meaning, we no longer drive 100 miles but 200.
But the whole argument is academic because up until at least 2005, oil supply has been increasing. Prices haven't even begun to rise, in comparison.
"There are about 730 million cars in the world, 210 million of them in the U.S. Many U.S. citizens have chosen to drive large cars, most of the time alone. Each car in the U.S. travels an average of 12,000 miles per year. Every American travels an average of 17,000 miles per year. The average trip carries 1.5 passengers. The average car weighs more than 3000 pounds and consumes an average of 550 gallons of fuel in a year."
http://www.mii.org/pdfs/miiMineralsBaby2004.pdf
What is the comparison to 1970? Didn't find that on a quick search of the net.
JD, found an article which would inspire a number of posts for your retired blog - if you turn the logic around:-)
"After 1960 there was almost no improvement in electricity generation efficiency. The new rail transit and light rail in the last quarter of the 20th century must be compared with an auto of increasing fuel efficiency. So today, electric rail transit is only perhaps about 25% more energy efficient than the auto-SUV in urban use."
http://www.lafn.org/~dave/trans/energy/fuel-eff-20th-1.html
So really, there's a whole phletora of possible improvements that are likely to find their way into future cars given the current emphasis on fuel costs.
An excellent key point about mitigation paranoia. The consistent belief that these technologies don't exist is severely hamstrung by the fact that they clearly DO, but haven't been refined or implemented because of greed-suck and cheap oil.
When the fight suddenly becomes all about who's building the most fuel-efficient vehicles, the "technological advances" that we're supposedly going to be treated with are going to be obnoxiously overwhelming. Everyone's got aces and jacks up their sleeve, they're just waiting like a bunch of grossero idiots for the right moment to spring them on the public.
Innate exploitation of the consumer and the corporate push for profits. The ultimate solution to PO, and the launching pad for all sorts of new problems.
Oh come on, gasoline prices were at their highest in 1982-1984. Pick a different starting year and you'd get quite different numbers - this is a bogus comparison. At least admit that the pretty graphic depends strongly on the range of dates you're comparing.
I'm not saying gasoline prices are way out of line, they're not, but this comparison is really misleading.
I would like to propose an alternate chart of inflation adjusted gas prices that does not start in 1979 or 1982-4, offered to us kindly by the American Petroleum Institute and linked from the ConocoPhilips site.
Here.
And another, from an oil-producing coalition-- this is for the price of crude rather than gasoline, but it shows the same trend, as one might expect.
Other costs have increased as well, obviously, but the assertion that gas prices are 'normal' based on the oil embargo prices is rather silly. I don't think we're on the edge of a massive energy-based cataclysm but the picture isn't nearly so rosy as all that.
nice cherry picking JD - Why did you pick the two years during the Iran-Iraq war (which, as everyone knows caused the oil shocks) to compare with a recent time when prices were lower than average for the past 3 years? A bit of honesty in your analysis wouldn't go astray.
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