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Jewish World Review March 9, 2005 / 28 Adar I, 5765 Gasoline prices 2005: An inflation-adjusted bargain By John Stossel
http://www.JewishWorldReview.com |
They've been saying it on TV, morning and night: "The price of
gasoline has risen again to a record high!" said one newscast, "The high
prices are making it harder for some to keep their heads above water," said
another. "Record high prices!" we keep hearing. "They don't even put the
price on the sign anymore," joked Jay Leno on the "Tonight Show." "It just
says, 'If you have to ask, you can't afford it.'"
Drivers aren't laughing. They think what they see at the pump
confirms what they've heard on TV. One told me the prices are "scary." A
woman said gas was "going up and up and up, and it's the most expensive it's
ever been." And she was on a bike.
Well, it's time to wake up from the gas-price nightmare. All
these media people are saying the gas prices are high for one simple,
simple-minded reason: They are looking at big numbers — but they are not
accounting for inflation. So the numbers look bigger than the costs actually
are. That's what inflation does. The reporting is irresponsible and silly.
Not adjusting for inflation would mean "Shrek 2" is one of the
highest-grossing movies of all time.
If you don't account for inflation, lots of prices keep going
up. Comparing a price in the dollars of the 1930s — when "Brother, Can You
Spare a Dime?" referred to a much more meaningful amount of money than a
dime is today — to a price in 2004 dollars is like comparing a price in
dollars to a price in yen.
It's not as if the reporters would have to work at doing
calculations to figure this out. Not only are there instant inflation
calculators on the Web, but the federal Department of Energy accounts for
inflation in its annual report of gas prices. It says gas is actually
cheaper now than it was throughout most of the 20th century. Yes, it's 65
cents more than it was six years ago, but it's nearly a dollar cheaper than
it was for much of the 1920s and '30s — and more than a dollar cheaper than
in 1980.
By failing to account for inflation, the media have some
Americans so alarmed that we can't think straight. "What costs more," I
asked customers at a gas station: "gasoline or bottled water?" The answer I
got from almost everyone was gasoline.
At that very gas station, water was for sale at $1.29 for a 24
oz. bottle. That's $6.88 per gallon, three times what the gas station was
charging for gasoline.
It gets sillier. I asked gas station customers, "What costs
more, gasoline or ice cream?" Most people said gasoline cost more. But a
gallon of gas doesn't even cost as much as a pint of Haagen Dazs, let alone
a gallon of it. At $3.39 a pint, "premium" ice cream costs about $27 a
gallon.
We should marvel at how cheap gasoline is — what a bargain
we're getting from oil companies. After all, it's easy to bottle water, but
think about what it takes to produce gasoline and deliver it. Oil has to be
sucked out of the ground, sometimes from deep beneath an ocean, a desert, or
ice. To get to the oil, the drills often have to bend and dig sideways
through as much as five miles of earth. What they find then has to be
delivered through long pipelines or shipped in monstrously expensive ships,
then converted into three or more different formulas of gasoline and
transported in trucks that cost more than $100,000 each. Then your local gas
station must spend a fortune on safety devices to satisfy government
regulators and make sure you don't blow yourself up. At nearly $2 a gallon
(an average of 44 cents of which goes to taxes), gas isn't expensive — it's
miraculously cheap!
But all we hear from clueless people in the media is, "Record
high gas prices! And they're going up and up." Give Me a Break.
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