Gasoline (and oil) prices in the USA feel high because the USD has declined in value.
The oil/gold ratio (two hard commodities) has oscillated between 8 and 20 barrels / gold ounce for 30 years - with occasional spikes up or down.
It's not the oil price that has risen - it's the bits of paper in your wallet that have fallen. Since 2000, the US money supply has increased from about $600 billion to about $2.6 trillion. That is a 300% increase in the amount of USD around - it's little wonder that a barrel of oil has tripled in value as well over the same period for that same currency.
The truth is that gas prices, adjusted for inflation, are about the same as they were 30 years ago. It's just a shame that most people can't adjust their income to inflation easily, and so see their gasoline bill eating up more of their disposable income than they would like.
So next time you shake your fist at the oil companies for gouging you, remember to shake the other fist at the Federal Reserve for devaluing your currency. They've both conspired in the ever-increasing prices.
The reason they think it is high is because it was historically low from about 1985 to 2000. Most people (especially kids like myself) aren't old enough to remember oil shocks and major wars that drove the price up. At 24, I got used to buying gas during the oversupply of the late 90s. People have short memories and no concept of inflation. My dad swears that gas prices are insane, even though he was paying much more per mile (inflation adjusted) during high school in the late 70s (due to lower fuel economy and the oil shock at the time).
The reason they complain is like you said... it has somehow become a really visible number. The morning news here cites the price every single day, as if the price of a barrel of oil was going to determine how my day would go. For once, we actually have something worse (more meaningless) than citing the Dow Jones every day.
The whole article is based on false pretense that fuel prices are highest in the known history. The fuel price have been stagnant for the past 60 years. If you use real money, i.e. gold or silver. Fuel prices, food prices, healthcare cost, etc. are all flat line price chart as long as you use real money. Once you use ever-dropping and hugely inflated USD or EUR, all prices seem to rise. Seem is very important here because in fact they don't rise at all. What happens is that the measure we use - USD - is collapsing in value. It's like saying cars are faster and faster, but every year lowering value of meters in 1 km. I.e. this year 1 km is equal to 1,000 meters, next year it will be equal to 980 meters, and yet next year it will be 950 meters, so on. So in 2024, 1 km can be as little as 760 meters.
A lot of economic news or developments don't make sense unless you understand that we have lived in permanent inflationary times for the past 50 years.
One of the main issues is that recent gasoline prices are not following historic trends against crude oil prices. A barrel of oil right now is close to 2014 prices, but a gallon of gas is not. The difference is being seen as profiteering off of global fear and not due to natural market forces.
IMO, atlasunshrugged gave a comment that mentioned a couple of important variables to consider.
Personally, I'd also mention the monetary policy factor. There's a huge problem of perspective when it comes to what prices are and what happens in inflation. You have to consider if prices are actually rising, or is the currency being reduced in value a lot? (Personally I think real inflation rates being under 10% is fiction and inflation is a lot worse than we're told)
Fuel prices are just significantly more visible to people than many other prices because gas station charges are so visible and one of the few purchases that is hard to avoid if you live in America outside of a dense city.
It's always made me chuckle when I see Americans complaining about their 'high' gas prices, even more so before this current price rise started.
I'm in the UK and my nearest fuel station (which is pretty averagely priced in my area) is currently charging $10.50/gallon, and that's been steadily rising for some time now. I'm not sure it's plateaued yet either.
Gasoline pump prices are highly impacted by taxes and regulations so those don't tell us much about core inflation or deflation. Look at the spot price of crude oil on international markets. The price today is still well below previous peaks.
The graph says it all. There haven’t been any technological changes in oil refining to make gas change in value. That it costs more per gallon in raw dollar terms means that the value of the dollar relative to the value of a gallon of gas has dropped massively.
Even more if you figure that today’s cars are pretty damned efficient and use way less gas than a car from the 70s, so we extract more value from a gallon of gas in terms of work performed.
We actually don't have all time high gas prices, at least not yet. They were higher pre-2008 crash when adjusted for inflation. Which is the only price that matters. After all, we also have all time high average income right now as well.
The US has a radical cost difference in gasoline prices vs most of world.
Some reference per gallon prices right now: China $4.41, India $4.47, Japan $4.93, S.Korea $5.46, Spain $5.90, Germany $6.45, UK $6.59, Finland $6.83, France $6.99, Denmark $7.22, Italy $7.29, Netherlands $7.48
The US by contrast is at $2.99.
The US is now exporting immense amounts of oil and that is set to grow by a lot in the coming years. That hasn't occurred since the export law restrictions in 1975. The US is heading to 2 million plus barrels per day of exports this year. Chart:
More likely the price of US gasoline will continue to drift slightly higher toward the rest of the world, as the exports bring the US closer to a normalization with everyone else (emphasis on closer). Those exports are seeking higher prices internationally, which will result in at least somewhat higher domestic prices (dramatically less domestic captive supply).
Further, the dollar is on a longer term trajectory down, due to the vast US budget deficits that are set to continue perpetually. That will push up the price of commodities priced in dollars, ie oil, which will also push up domestic gasoline prices as a consequence.
Tesla is going to sell a lot of cars as domestic gasoline prices gradually head toward $5 as a normal level (combination of less captive oil supply, and a perpetually eroding dollar value base).
A lot of this is also simply put an issue of fraudulent paper money as well. Most gas here is $2.21 per gallon. As of today. Here's the rub...
Take a pre 1965 quarter. When it was still made with silver. If you take that quarter and melt it down. That .25 has enough silver to buy a gallon gas in today's silver price. $2.25 of fake inflated printed out of thin air "money" or a quarter made of silver. If the currency today was still constitutionally backed by gold and silver you could actually live acceptably working at McDonald's. So I say a good chunk of this is the currency.
It's probably bad if you're living paycheck to paycheck and you're struggling to get by. Then on top of already extremely high gas prices they increase further. On top of prices for everything else going up and the value of the dollar going down. Sure, it's probably a bad thing altogether.
The oil/gold ratio (two hard commodities) has oscillated between 8 and 20 barrels / gold ounce for 30 years - with occasional spikes up or down.
It's not the oil price that has risen - it's the bits of paper in your wallet that have fallen. Since 2000, the US money supply has increased from about $600 billion to about $2.6 trillion. That is a 300% increase in the amount of USD around - it's little wonder that a barrel of oil has tripled in value as well over the same period for that same currency.
The truth is that gas prices, adjusted for inflation, are about the same as they were 30 years ago. It's just a shame that most people can't adjust their income to inflation easily, and so see their gasoline bill eating up more of their disposable income than they would like.
So next time you shake your fist at the oil companies for gouging you, remember to shake the other fist at the Federal Reserve for devaluing your currency. They've both conspired in the ever-increasing prices.
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