Gas price "fix?"

This gas price hysteria we've been subject to lately is really something else. The price of gas went from $2.50 a gallon, where everything was apparently hunky dory if the lack of attention it received was any indicator, to 3 bucks, which apparently signifies the end of days. For those like Illinois Senator Dick Durbin (for whom every problem is a nail) there is only one possible explanation: Corporate malfeasance. The proof? Exxon Mobil's chairman recently retired and was awarded, gasp, a retirement bonus.

Very well then, let's just regulate the cost of gasoline nationwide so that "Big Oil" no longer has the latitude to gouge innocent consumers ever again. How about fixing the price of a gallon of gas at the pre-hysteria price of $2.50 per gallon, allowing increases only for the rate of inflation of the dollar. That ought to fix their wagon, and protect the consumer, right? Not so fast comrade commisar!

Check out the chart below that shows historical gasoline prices in constant 2006 dollars. (from www.factsonfuel.org)

If gas prices had been fixed at $2.50 (2006 dollars) in the past then we'd all have been OVERPAYING by more than 50 cents a gallon for the 22 years since 1984. Who's the gouger now mister price control?

While it's true that gasoline now costs roughly 50% more than when I was born, and roughly 20% more than when I got my driver's license, it still hasn't reached a record high price. The real cost of gasoline was greater than today's at two times in history: One was at the birth of gasoline as a motor fuel in 1918, and the other was the transition between the Carter presidency (when oil supplies were pinched and inflation soared) and the Reagan era, when supply tightness eased and inflation was brought back to earth. In all likelihood the prices we see today are as transient as those of the early 80's.

Is it possible that we'll see record high prices? (Over $3.25/gallon as an annual average.) Yes, but this wouldn't negate my transitory argument. It would merely illustrate the power of the government to add more costs than have been eliminated by efficency improvements made by "greedy capitalists." (Such a development would also be an awesome marketing tie-in with the new 'Atlas Shrugged' movie!)

Oil and Energy Posted by JohnGalt at April 29, 2006 11:00 AM