I heard Bob Froelich go down this road earlier today talking about oil at $70 versus where it would need to be to compare to 25 years ago.
We have been hearing about this point for many months now. I am not fond of this line of thought or, depending on how its used, justification.
I don't want the worst period in our country's history for energy prices to be the benchmark. If the inflation adjusted number is $100, how relieved will you be if it only goes to $92? Does it ease your mind to know if it costs you $52 to fill your SUV now, you only have $13 to go before your 1980 station wagon equivalent?
I find the whole thing to be silly. If a year ago is cost you $32 to fill your car and now it costs you $44, you either have a hardship or you don't regardless of what was going on 25 years ago.
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8 comments:
Hardship? By the way, the report on poverty came out today. Like many gov't reports, including inflation and CPI, it's a dishonest number. The actual number is higher.
Even more absurd in their comparison of today's gasoline prices to 25 years ago is mileage per gallon of that station wagon you referenced. I think our family gas guzzler (which we affectionately referred to as the "battleship") got about 10 miles to the gallon. My current SUV gets 25 mpg. I'm not going to do the math, but to make the proper apples to apples comparison with that mileage, gas prices would have to hit $5/gal. or higher!
If the family budget is x, and it costs 2x to drive this year versus last year, that's a serious pinch on disposable income no matter what was happening in 1980.
Uncle Jack
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excuse me, family budget should read: "family gas budget"
thanks for all the comments
I remember gas being roughly $1.20 a gallon when I was in college in Boston and my car got 8 miles to the gallon (I use to bicycle whenever I could)
Last time I filled up gas was $2.56 a gallon and my vehicle is getting around 20 miles to the gallon. Sure I was a lot happier when gas was more than a dollar cheaper.
But between inflation and vehicles getting better gas mileage it is not nearly as bad as it was back then. Of course if you want a reason to complain gas prices are as good as any other.
If current energy prices aren't that much of a pressure compared to 25 years ago, the implication is that there is still a good deal of potential upside to prices until demands starts to seriously slacken.
On the other hand, personal accounts of low fuel milege aside, average miles driven have increased steadily over the last quarter of a century, numbers of vehicles per household has increased; leading to greater gas consumption per capita.
While cars are much more fuel efficient than they were in the early 70's (the greatest improvements in milege occured between 1977-1981), that half of all vehicles used for transporation are now light trucks and SUV's has offset the increased efficiency.
(Average 2004 model car or truck got 20.8 miles per gallon.)
Have wages kept up with inflation?
Yes, household incomes have grown in real terms (adjusted for inflation) over the last 25 years.
But, it has been very uneven. The top 5th of households have had a major increase in income, the bottom 5th have had a decent(?)increase, the middle 3/5's have had very modest net increases (the 2nd 5th -- the $17-25,000 group has just about been flat).
BTW, that is not what happened during the 25 years before the late 70's. Increases in real income was about uniform across all 5th's.
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