The Price of Gasoline

It always fascinates me when an issue becomes hot and dominates the news. Why did it suddenly become so news worthy? Did we experience a drastic change that led to the issue or was the cause more gradual and not noticeable until a tipping point was reached?

The price of gasoline is a great example. Any “stupid” person knows the economy drives election outcomes and our pump pain could influence the casting of ballots in November (if the current trend continues). Yes, the pain is real and I wince every time I fill up my gas guzzling vehicle. But how did we get to this point? It may just be me but high gasoline prices were seemingly not on the radar until recently. Did the prices suddenly spike high or has the change been more gradual over time? Let’s let the data tell the tale.

Graph One shows the United States city average for regular gasoline by month from January 1976 to June 2008. Based on the data, the price increases over time but we would reasonably expect that due to the difference in costs of living during the time frame. Graph Two shows the same prices but uses the consumer price index (1982-1984=100) to express the prices in 2008 dollars. Based on this data, we felt approximately the same pump pain in the late seventies to early eighties.

Graph Three trends the month to month change in the price of gasoline. The differences were fairly consistent from January 1976 to approximately February 2000. The magnitude of change increased in approximately March 2000 and again in approximately September 2005. Stated another way, the month to month variation in prices seemed to increase in March 2000 and September 2005. What we feel now appears to stem from September 2005.

Graph Four breaks the overall price trend into stages. Based on the data, the price of gasoline started to consistently increase in approximately April 2000.

My overall conclusion: The opportunity for improvement we face now is the result of a gradual change that began in 2000. I don’t know what changed. But the factors and forces that led to what we face today seem to have been in play for some time. Did we see them? Did anyone take notice of the trend? Could something have been done earlier?