Falling gas prices

My wife and I left California for our retirement home in Texas in mid May. When we left San Diego we paid $4.89/gallon for regular. Yesterday, in south Texas, I filled our car for $2.93/gallon. That price is caused by several things.

The first is that Texas has less tax on a gallon of gas than California. But more importantly it is because demand has gone down due to several factors.

Second the European economy is in dire straights and thus the demand in Europe is down.

Third the demand in the US is also down due to economic woes (people tend to take fewer vacations and stay closer to home when the economy is bad).

And last but not least President Obama opened the Strategic Petroleum Reserve in 2011 due to the political situation in Libya and elsewhere. The ripple effect has trickled down to the pump almost a year later (oil in the pipeline in late 2011 went to the refineries in early 2012 and is now showing up at the gas pump in your local neighborhood).

If we adjust the price of gas to inflation we get a very interesting fact. In 1965 I paid about $.35 per gallon. Adjusted for inflation that comes to about $2.35 in today's money. So, adjusted for inflation, gas has only increased by about $.50 per gallon. Now adjust the $.50 for inflation and the price of gas is only up about $.05 per gallon in 1965 dollars.

The price is not as bad as a lot of you seem to think. Compare the price of gas to the price of cars. In 1965 I bought a Chevrolet Impala SS Convertible for a little over $3,200. My 2011 Mercury Grand Marquise cost me just under $32,000. So, adjusted for inflation, the cost of a new car has gone up more than the cost of gas. ($.035 - $2.83 vice $3,200 - $32,000)

 

Let me guess. You did NOT major in math?