I have spent so much time on the national security debate that I have really ignored the economy. There has been a lot of press lately about falling gas prices, with average prices around $2.38/gallon today. That is a $0.24 drop in the last two weeks alone. Given the proximity to the election, many people are clamoring about market manipulation by Big Oil to help the GOP bury one of the key dissatisfiers prior to the election. While I doubt that companies can impact the market so dramatically, I share some of the concerns of those critics.
However, I really think we are asking the wrong set of questions about gas. First, there is historically a September/October drop in prices given the switch from the more expensive summer formulations to the cheaper winter ones. Second, I think the American public is the victim of recalibrated expectations. The last couple years has moved the public perception of expensive gas to being $3.00/gallon instead of $2.00/gallon.
Here is some government data on gas prices since 1990 (all information below derived from this database):
- In September 1990, the average price of gas was $1.25/gal.
- The last measured price in 1999 averaged $1.27/gal.
- During the Clinton presidency, Gas prices averaged between $0.907/gal (Feb 1998) on the low end and $1.285/gal (May 1996) with an average price of $1.11/gal. During his eight years in office the price of gas increased at an annual rate of 2.5% ($1.04 when he took office, $1.27 when he left office).
- During the six years W has been in office. Gas prices have been as low as $1.06/gal (Dec 2001) and as high as $3.07/gal (September 2005 - post Katrina) with an average price of $1.77. During these six years we have seen the price of gas increase at an annual rate of 11.0% per year ($1.27 when he took office, $2.38 today). If you look at the price of gas two weeks ago of 2.61 that is a 12.7% increase per annum, and going back a month we gas averaged $3.00, you get 15.6%.
The GOP likes to claim supply issues and refining capacity as reasons why gas is so high, but really, why could we hold the line on gas prices in the '90s but not the last six years. Maybe the reason is we have not seen a significant change in the MPG standards required of the automakers by Congress. Lack of leadership is the reason behind this demise. So, even with the prices falling so quickly the past couple of weeks, don't fall for the trap America. Don't recalibrate your expectations because it only takes $44 to fill the minivan instead of $58. Remember that before this administration took office, it only took $23 to fill that tank. So even if the price of gas is under $2.00 come November, remember the entire six years, not the last six weeks.
Two little factoids to remember as I wrap this up for tonight:
- The last time we were under $2.00/gal was March....OF 2005!
- The average price of gas for the last year is $2.61/gal (this includes the last two week free fall of prices).
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