Inflation adjusted Gasoline Prices

Updated June 15, 2011

In 1969 gasoline was only $0.35 a gallon. By 1976 it had risen to $0.60 per gallon. And by 1980 - 81 we were shocked as gas prices rose above $1.00 for the first time. In only 12 years gasoline had risen a full dollar from $0.35 to  $1.35.  That is an increase of 286% in 12 years! Because the overall value of the dollar has fallen, in order to compare the cost of gasoline over longer periods of time it is necessary to adjust the price for inflation.

In 1981 that $1.35 would be the equivalent of $3.31 in inflation adjusted terms for 2011 dollars.

Compare that to the price increase from 1998 where the average price was $1.02 and by July 2008 it had increased to $4.02 and you  have a 294% increase in 10 years even greater than the 1981 spike.

Amazingly the average inflation adjusted gasoline prices for the following peak years were; 1918 was $3.69, 1938 was $3.16, 2008 was $3.23, and for 2011 so far it is $3.51. All very close when adjusted for inflation.

Interestingly, the average price of a gallon of gas from 1918 to the present is $2.45 in 2011 inflation adjusted dollars. So it is safe to say that anytime during that period that the price of gas was above $2.45 in inflation adjusted terms it was expensive and whenever it was below that price it was cheap.  So obviously when it reached $4.00 a gallon in July 2008 it was expensive. And with the average for 2011 at $3.51 we are once again expensive.

If we look at the average annual Inflation adjusted gasoline prices for each of the following years  (1958, 1968, 1978, 1988, 1998, and 2008 )we see several of the "8" years below the average.

Inflation Adjusted Gasoline Prices
Year	Price
1958	$2.32
1968	$2.18
1978	$2.22
1988	$1.81
1998	$1.39
2008	$3.34
2011	$3.51

So if the long term average price is $2.45 then in 1988 gas was very cheap and in 1978 it was only slightly below average but in 1981 (at an inflation adjusted $3.24) and in 2008 it was extremely expensive on a historical basis. 

In 1998 gas had gotten really cheap by historical standards allowing people to buy gas guzzlers like SUV's and Hummers.  But that reversed in 2008 as prices rose above the long term average.  Fortunately, prices fell in 2009 - 2010 but in 2011 it is once again expensive.

Remember that these are average annual prices and individual months had much higher averages and on a weekly or daily basis prices could (and did) spike much higher (and lower).

According to the US Energy Information Administration the average price of a gallon of gasoline in May 2011 cost $3.91 ... although many places like California people would have been glad to find gasoline for $3.91 a gallon. So in addition to averaging over time it is also averaging over the whole country.

One way to save money on Gasoline is to use a cashback credit card with an extra bonus for gasoline purchases. Some cards can save you 5%.  A 5% cash back can reduce $3.91 to $3.71. Saving 20¢ a gallon may not sound like much but if your tank holds 15 gallons that is $3.00 per tank. If you fill up twice a week that is over $300 a year ($3.00 x 2 x 52).

We have compiled a list of cards that give Rewards on Gasoline purchases. See which Gasoline reward card is best for you here.

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