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Wednesday, April 27, 2011

A Look At Gas Prices Without The Media Hype

Gas is pretty freakin' expensive, let's just get that right out on the table. I have a 40 mile round trip commute everyday and I own a mid-sized pick-up truck. In February I spent around $60 a week for gas, now I am spending around $90.

I have no faith in President Obama's energy policy because not only doesn't he have an energy policy, I don't think he understands energy. Just FYI, 17% of all US energy consumption is gasoline, and right now that's what I care about.

Two weeks ago we were all a-twitter because we imported too much energy. This week our collective panties are all bunched up because the dollar is weak. Last week, I think it was speculators. I don't know anymore because everyone is yelling at me so much.

I like facts, so let's look at some facts.

In the twelve years from 1969 to 1981 the average price of a gallon of gas increased 286% (compensated for inflation). In the ten years from 1998 to the 2008 peak the average price for a gallon of gas increased 294%. In 1981 the price for a gallon of gas was $1.35, adjusted to $3.24 in today's dollars. At the peak, in late summer 2008, gas was $3.23 a gallon in 1981 dollars, a decrease of $0.01.

I looked at the numbers from the 1950's to today and I learned one thing: sometimes gas is expensive and sometimes it is not. Right now it is. When gas was expensive (and hard to find in the late 70s) Toyota and Honda made massive inroads into the American car market. The last time gas was cheap, Hummers and Escalades insisted on getting in my way on our nation's highways.

Here's some more fun facts:

The percentage make-up of a gallon of gas at the pump looks like this:
  • Crude oil:  2005 = 53%, 2011=67%
  • Federal/State Taxes: 2005 = 19%, 2011 = 13%
  • Refining & Profit: 2005 = 19%, 2011 = 11%
  • Distribution & Marketing: 2005 = 9%, 2011 = 9%
The only significant change is the price of crude oil and in fact, (much to my Libertarian chagrine) taxes as a percentage decreased. Crude is expensive because the people who control it for the most part are in a state of flux, more people are buying it, and they're buying it with American dollars which are now hardly worth anything because we've printed so many of them.

Will gas go down again? Yes. Is the world as we know it ending? No. Are things bad out there right now? Yes. Is alternative energy the answer? Eventually, but I'm kind of concerned about next Tuesday, and this summer, so alternative energy as government policy is destructive in present terms.

Here's how gas prices can be lowered:
  • Pay less for it by buying it from ourselves.
  • Stop printing so much money and make the dollar stronger.
That's it. It's not difficult. Now if only the current Administration would read this blog...

In the meantime, check this link on inflation out: InflationData.Com

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