Gas Prices: Not Really So Bad

Here, from the Cato Institute, is a very interesting perspective on the cost of gasoline:

The fact is that high pump prices are not reducing demand very much because they are not imposing anything like the economic pain alleged by politicians. For instance, if we adjust nominal gasoline prices in 1949 (27 cents per gallon) by inflation, we get a price of $1.90 per gallon in today’s terms. If we further adjust those prices by mean disposal income, we find that gasoline prices would have to be $6.68 per gallon before they were taking the same bite out of our wallets as they were in 1949.

In 1962 -- a year writ large in the popular imagination as the quintessential year of muscle cars and cheap gasoline thanks to the movie American Graffiti -- gasoline prices averaged 31 cents per gallon. When we factor changes in disposable income, today’s gas would have to cost $4.48 to be a comparable burden.

The public likewise thinks of 1972 as the last year of energy innocence prior to the rise of OPEC and the onset of shortage. Fuel prices in 1972 averaged 36 cents per gallon, a hefty $2.77 per gallon in today’s terms. While still high, this price is not all that different than the prices we were paying earlier in the year.