Gas Prices Steadily Falling, But…

Gas Prices Steadily Falling, But…


This may seem like good news for people at the pump, but let’s not forget that even with oil falling to $115 a barrel, it’s still well above where it was just a year ago…and a year before that…and so on.

And as the following graph from The Oil Drum illustrates, prices have dropped over the past 8 7 years, but only momentarily before going back up, up, up.

An average growth of 30% per year over the past 8 7 years. Pretty amazing, no?

Simply put there’s nothing to suggest the bubble has burst yet, and while some say this is due to the basics of supply and demand, I’m still not convinced of that…yet.

  • kranky kritter

    I don’t buy this “average growth rate of 30% over the last 8 years stuff.” The graph starts at about $22 in 2000. If $22 grows by 30% per year for 8 years, it reaches $180.To grow from 22 to about 119, that’s an average growth rate of 23.5%, still an ugly high rate, but much lower than you’ve stated.

    I believe what the graph shows is that from a low point of about $19 in 2002, it has grown about 30% annually.

    If you really want to measure the extent of what is untenable about current prices, what needs to be done is to look at what it would be if it had grown at the rate of inflation, and then compare current prices to that. To my knowledge, current prices ARE well above what we might have expected due to inflation. However, since the prices we were paying were for so long well below that growth rate, we’re experiencing more of a shock than we would have if it had kept pace.

    If gas prices had kept pace with inflation since it was $1.35 in 1981, it would now be somewhere in the neighborhood of $3.20-something. Not trying to suggest it aint painful, BTW. It is. Just pointing out that we experienced good fortune on gas prices for a long time, and now that our luck has run the other way, our previous good fortune makes our bad luck feel even worse.

  • Justin Gardner

    Sorry, it’s grown 30% over the last price each of the past 7 years, not 8. Start where the blue dots start. That was my mistake saying 8.

    And yes, we’re not at 7 years yet, but we’re very close.