“Gas prices are through the roof, why are you still driving?”
That might as well have been the cry from “World News Tonight” substitute anchor Kate Snow as she opened the July 10 broadcast.
The answer would be: They’re just not as expensive as the media would have you believe.
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Reporter Dean Reynolds sounded more incredulous. “Americans have been using up fuel like there’s no tomorrow,” the reporter complained from a gas station in
While Reynolds went on to report how high gas prices are changing consumer driving and car-shopping patterns, he left out any historical perspective on how big a bite gasoline takes from the average American’s budget.
For one, far from being one notch below the all-time record, $2.97-a-gallon for gas is 15 cents off of the all-time high from March 1981 when adjusting for inflation, according to data from the federal Energy Information Agency (EIA). [1]
What’s more, analysts at the libertarian Cato Institute [2] calculate that when factoring in inflation and per-capita income, the average price of regular unleaded gasoline is reasonable.
“The average household is spending $136 more on gasoline every month than it was in 1998 and $114 per month more than it were spending in 2002,” Cato’s Jerry Taylor and Peter Van Doren conceded. “But, believe it or not, real (inflation-adjusted) disposable income per household has increased even faster than have pump prices; by $800 a month since 1998 and $279 a month since 2002,” they added.
Simply put, higher gas prices are sustainable because income is outpacing gas price growth. And income is outpacing gas price growth thanks to the strong economy [3] that the media also give short shrift.