Much Ado About Gas Prices

markmcb writes "It seems that a week cannot pass without finding big news about gas prices. They're up, they're down ... but why do we care so much? OmniNerd posted an article that aims to put gas prices in perspective. The author takes a look at other commodities and their price variances and applies some simple math in order to make the claim that best-gas-price-hunting is an effort that could be better used on other products. From the article, 'Why the disproportionate emphasis on gas prices in our culture, then? Although some cite a failure of politicians or media populists to account for inflation and purchasing power changes, I think it is simply because gas prices are in your face.'" IMO, the other side to the price of gas is that, especially in developed countries, it has a pervasive effect throughout all layers of the economy — food prices (because of the trucking), schools (busing), etc., etc.

Comments

To really put things in perspective..

[avij]

The average price for a gallon of gas in that article was about $2.90, give or take a few cents.

Here in Finland a litre of 95 octane gas costs about 1.263e (1.295 for 98 octane and 1.008 for diesel).

1.263e / litre = 4.7809751e / gallon = $6.04697 / gallon

And you are complaining that gas prices are high? Well, at least these prices are a good incentive for me to use public transport..

Hogwash

[gr8_phk]

the claim that best-gas-price-hunting is an effort that could be better used on other products

I'm not a gas-price-shopper, but I know several people who are. It actually takes zero time to do since you're driving past all the big price signs on the way to and from work every day. To say the effort could be better used somewhere else is silly. Sure, people should make an effort for other products, but that would require... effort!

It's That Tenths of a Cent Thing

[moehoward]

The same ridiculous politicians who whine about gas prices are the same ones who allow it to be priced in tenths of a cent. I just find that rather humorous. Maybe because it is also the same politicians who are crying to get the penny taken out of currency circulation.

Anyway, all the space on those gas station billboards being take up by "9/10s" could be put to much better use advertising cigarettes.

To sort of answer the question, though, rising gasoline prices act like a tax in the economy, not inflation. Inflation is defined as an increase in available cash in the economy, usually as the result of the govermnet putting more of it there to cover rising prices. Gas is a rare economic beast because it is involved in the price of EVERYTHING you pay for due to transportation costs. And also it is non-elastic in a major way.

very sensible

[purplelocust]

This is consistent with what I observe- people spend too much time worrying about getting the lowest gas price, when there are many other fronts on which it would make much more sense to optimize. There are people who cross the George Washington bridge from New York to New Jersey to get gas at a lower price, when the cost of the bridge toll ($5) is typically well more than the savings (30 gallons of gas at $.15/gallon cheaper = $4.50, for example, and it is practically never a 15 cent difference or more)

Some years ago, I remember a widely quoted congressman who was arguing against raising the US postage rate from $.25 to $.30 (they ended up raising it to $.29.) My belief was that it would be sensible to have $.30 postage, with $.25/additional ounce, to make the computations easy, and that it was ridiculous to have a $.29 postage rate with a $.23 marginal rate beyond the first ounce (how many people know their multiples of 23 and want to add them to 29?) The argument was the congressman made, which apparently resonated well, was that "people will drive halfway across town to save a penny on a gallon of gas (it was the late 80s or so) so we should do the same with postage." This pointed out several things vividly to a young me:

1. people/congresspeople do not understand the difference in discrete and continuous commodities (stamps and gas)
2. an argument doesn't have to make much sense for it to resonate with many people

Re:Eh hem, size matters.

[GreyPoopon]

Add to this the fact that our society is pretty damn car-centric, and you have something that is really on the minds of everyone.

Too true. For many of us driving is mostly non-discretionary, which means it's very difficult to cut back in order to save money. It's like food. In order to get to work, we have to drive. It's not like clothing, where you can stretch out the current wardrobe a little longer before you have to replace it. Some people (particularly my colleagues in Europe) will argue that we should take public transportation. But in most of the US, public transportation is not really an option. In my case, my job makes my schedule unreliable, so I can't carpool with others. The distance from home to work is 35 miles and takes the better part of an hour to drive. I did some research and found a way to get there via public transportation, but that would take about 2.5 hours with multiple bus changes and a total price higher than what it costs to drive. I just can't imagine paying more to spend 5 hours commuting each day. Some suggest that I move closer to work, but with the housing boom over the last few years I can't afford more than a crackerjack box anywhere near where I work. I don't drive any more than I have to, but it still costs me in the neighborhood of $40/week. My wife has a similar situation but without quite as much driving. We have reduced the fuel budget about as much as is possible. But regardless, our budget is definitely feeling the $150 extra per month we have to pay.