2008 November 22 Saturday
Inflation-Adjusted Gasoline Prices Back To 1960s

Mark Perry, an econ prof at U Mich Flint, says that adjusted for inflation the $2.12 national average gasoline price of last week is cheaper than any time before the 1960s.

The chart above displays real gas prices going back to 1919 ( data here), showing that the current national average price of $2.12 is below the price of gas during the entire decades of the 1920s, 1930s, 1940s, 1950s, about the same as the average price during the entire 1960s, below the average price during the 1970s, and below the average real price of gas during the entire 1919-2008 period ($2.36).

Click thru to see his inflation adjusted historical gasoline price graph. The most surprising thing about the graph: Gasoline was much cheaper during the 1990s (the hey day of the SUV) than in the 1960s. Back in the late 1990s the inflation-adjusted price of oil fell below the 1960s oil prices.

Share |      By Randall Parker at 2008 November 22 02:02 PM  Economics Energy


Comments
Steve Sailer said at November 22, 2008 3:09 PM:

Maybe GM should save itself by reviving the Hummer?

Ned said at November 23, 2008 10:58 AM:

Steve -

Although I'm sure you're being humorous, the inability of the Big 3/UAW complex to respond quickly to changing market conditions has been a real and significant problem.

Randall Parker said at November 23, 2008 12:50 PM:

Ned,

Can Toyota bring out a new car any faster in response to changing market conditions? Or is it that Toyota has a wider range of offerings in the first place?

I thought Toyota had a 1 year time advantage for total time to design a new car and put it into production. But I think Ford has cut at least a year off their car design process. So it is not clear to me if Toyota still has a time-to-market advantage.

Ned said at November 23, 2008 3:43 PM:

Randall -

In the past, the foreign car makers such as Toyota responded much more nimbly to changing market conditions. Nowadays? I'm not sure. The Big 3 may not be around to withstand too many more market changes. You have to remember how Detroit's business model worked. Overpaid executives supervised overpaid workers making overpriced, mediocre vehicles to sell to other Americans. When this model began to break down back in the 80's, the auto makers didn't respond by reducing costs and becoming more efficient but instead asked the government for import quotas. This worked for a little while, then the foreign companies began building cars at their US plants (mostly non-unionized). The companies were notoriously bureaucratic, and, when the unions got involved, every change was a negotiation. Much of this is gone now, but it may be too late. I'm not sure whether Toyota has a time-to-market advantage any more, but they have so much more money and lower costs and debt than the US companies that I think the game is pretty much over (for example, the $12 billion that GM is asking for from the government will keep the company afloat for about a year at the current rate of cash burn, which may accelerate if sales start slipping). What happens then?

I live in Michigan and follow the auto industry closely. I know a lot of auto people, both workers and executives. I don't in any way look forward to the economic disaster that the crash of the Big 3 is going to cause, but I just don't think they can be saved. The game is over.


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