Gasoline Inflation

Inflation adjusted Gasoline Prices Above all time highs

Updated April 16, 2008

With average March prices at $3.22 Gasoline prices are above the average annual prices paid at the all time peak in 1981.

Back in 1980 - 81 we were shocked as gas prices rose above $1.00 for the first time. This was especially shocking because in 1976 gas was $0.60 per gallon. But by 1981 the average price for the entire year was $1.35.

Obviously if that was the average some people were paying much more. Adjusting this for inflation we get an average inflation adjusted price for a gallon of gasoline in 1981 of $3.17 in March 2008 dollars. 

According to the US Energy Information Administration the average price of a gallon of gasoline in March 2008 cost $3.21 ... although I know in many places like California people would have been glad to find gasoline for $3.21 a gallon.

I spent several weeks driving around California in March and often saw gas closer to $4.00 a gallon.

But the same would have been the case back in 1980-81.  We are not dealing with peak prices but average prices. And not only average prices over the whole year but also over the whole country, so there is quite a bit of variation.

The chart at the right shows the Average annual Gas prices in nominal terms (what you actually pay) and in inflation adjusted terms (red line).

Back in 2006 the news media began talking about "all time high gasoline prices" but at that time our chart showed that in "inflation adjusted terms"  we weren't there yet.

But recent spikes have brought it up above the average levels of 1980 - 81.

Unfortunately, way back in 1918 when Gasoline was a luxury item and people still rode horses as their means of transportation...  gasoline in inflation adjusted terms was about $3.50 a gallon.

So average prices are not quite above "all time" records except in places like California.  But it won't be long and I will be able to officially declare "Average Annual Gasoline Prices in Inflation Adjusted Terms are at an All Time High".

But current prices are higher than the average annual price in 1980 putting us in position to have higher average prices than 1980.

Remember the stress those high prices put on the economy.  We need to be cautious because the economy could be in danger from high energy prices.

See article on Stagflation.

Inflation Article List

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(click on chart for larger image) 

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See the current MIP to find out what we are predicting for next month and next year. Remember our projections are based upon sound mathematical formulas not on simply extending the current trend forever.

You may also be interested in knowing how to Calculate the Inflation Rate .

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