From Randy Olson: Gasoline Prices: the CLASSIC Shifting Baseline

Good news! Gasoline is back below $3 a gallon. What a bargain. Everyone can stop worrying about the rising price of gasoline.

Okay, let me date myself in a big way. The summer of my senior year of high school I worked at a gas station where the price was $0.19 a gallon. That's nineteen cents. And then in college it shot up to over a dollar during the OPEC oil embargo and the U.S. had a nervous breakdown. Huge lines appeared at filling stations and we passed a 55 mph speed limit to reduce fuel consumption.

Today its three times that price, everyone drives Hummers, and yeah, I guess some people might be ready to to worry a little bit if it goes beyond $4 per gallon. But slipping back down below $3? That's a freakin' steal! The baseline is now shifted to $3 a gallon, and anything less is glorious.

And by the way, on a curious comparative note, airfares have just about never changed over the course of the same 40 years. A cross country ticket in the late 60's was about $500 or less. Same price today. What's up with that?

GASOLINE: I refuse to pay more than $50 a gallon. I think.

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Of course, we all made $1.50 an hour that summer. There has been a little inflation since then, Randy. And until recently it was damn cheap in inflation adjusted terms. I'm not sure the rest of the country is quite so shifted as Californians are, at least not yet. Planes? They had real seats and food, and then we got competition and they turned into buses. Not been much competition in the oil biz. (Of course, the gas stations cleaned your car and gave you stuff too, even when it was $0.19 a gallon.) I am like you completely baffled why, with the supposed recognition of high prices AND climate change, no has the cojones to talk about bringing back the 55mph speed limit. We grumbled, but we survived. Bizarre.

By Michael Hirshfield (not verified) on 25 Jan 2008 #permalink

There was a good comparison graph of 1999 vs. 2007. Fuel in 1999 was < $1.29 a gallon. Granted it's eight years but the price tripled in that time.

I for one would love to see us out of Iraq, the military budget sliced in half, and the remainder distributed among health, welfare and true energy independence.

What is amazing is the current disconnect between the prices of oil and gasoline. Last spring we were paying $3.40 while oil was $60. Now with oil circa $90 we are paying $3.00. Last spring you would have laughed all the way to the bank if you owned refining stock, now you would be crying. The demand apparently has gone down with the rising oil price. Supposedly in the perennially undersupplied bay area, they are filling a couple of ships with gasoline for export!

If you saw the documentary, "Enron: The smartest guys in the room," you probably feel reasonably paranoid that we are all just a bunch of mice running back and forth while a few weasels pull the strings. The worst part of that movie was seeing how just a few individuals were playing games with the entire general public of California. And that's a really good point, bigTom, on the oil/gasoline price disconnect. I hadn't even made that connection.

By Randy Olson (not verified) on 25 Jan 2008 #permalink

well which would you rather have, the shift in price or the magic of the shrinking Hershey bar or "pound" can of coffee?

By DrugMonkey (not verified) on 25 Jan 2008 #permalink

Gasoline prices react to factors besides oil prices, which is why pump prices jump around enough that anyone who demonstrates the abilty to predict the price at a handful of selected gas stations over a two or three month period should win the Randi Prize. If you filter out all the noise, though, the trend is relentlessly upwards.

Back around May 2001, pump prices here in SoCal, which had been around 1.65, jumped to the 2.25 range in only a couple of weeks. The reason? Refiners had misunderestimated how big of a batch of California blend they needed to stir off for spring; as stocks got tighter, retail prices skyrocketed. This was complicated by the fact that the refineries were already scheduled more tightly than a concert tour and that even if New Jersey had been covered neck-deep in hi-test it couldn't legally be sold here because it didn't meet our smog standards.

Prices dropped back to "normal" after a few weeks, when the next production run got started.

It isn't just oil prices; apparently the balance between refining capacity and demand is so tight that even small outages can have a surprising effect on the retail price of gas.

By Ktesibios (not verified) on 25 Jan 2008 #permalink

leave it to Randy Olson to point out a shifting baseline and not investigate the cause of the shift. baselines don't suddenly shift. there are factors at work besides evolution (if Mr. Olson even believes in that). rising crude oil prices since 2005 (which started the year at $42/barrel and ended the year at $70/barrel) have less to do with people driving hummers or even the war in Iraq. the most dramatic cause of that spike was Hurricane Katrina which successfully halted more than 25 percent of U.S. crude oil production and 10-15 percent of U.S. refinery capacity. On top of that, major oil pipelines that fed the Midwest and the East Coast from the Gulf of Mexico were shut down or forced to operate at reduced rates for a significant period. With such a large drop in supply, gas prices spiked dramatically.
So if we take this one step further and we believe Global Warming is a fact, not a myth (God knows what Olson believes. if he's true to form, he'll make another manipulative documentary showing us that Global Warming naysayers are just cool people worth having a beer with), and that humans help cause it...then it's clear through industrialization, etc...we are ultimately responsible for both Katrina and the rise in gas prices. So it's no wonder we got used to the increase so quickly. It's amazing to me that a scientist wouldn't look for the empirical evidence to find the source of the shifted baseline so that he could present means by which to shift the baseline back to a level worthy of our survival. Yes, we know our standards suck, Mr. Olson. But what do you propose we do about it?

It might make for boring discussion, but I don't believe anyone in this thread (or even the scienceblogs sector of the blogosphere) doubts evolution, climate change, or political motivations behind oil prices. I suspect that memories of old oil prices are eased not only by inflation, of course, but also by the rising American income, particularly among the class of people driving. That said, I put $50 in my sedan the other day and did have to ask aloud: "When did I start driving a Suburban?"

Pah. I'm paying £1.01 per liter; I look upon your $3/gallon with envy and contempt.

By Luna_the_cat (not verified) on 28 Jan 2008 #permalink

GASOLINE: I refuse to pay more than $50 a gallon. I think.

I am hoping we get to the point where renewable have replaced the oil addiction before we get to the point where you have to decide whether or not to pay the $50!
When I was a high school senior I worked at a gas station where we had price wars that brought it down to 25 cents so we lived through the same era. Electronics are one of the few things I have seen that have a penchant for moving down in price, so hopefully they can be used more extensively in our quest for energy independence!
Dave Briggs :~)