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Politics : Politics of Energy
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To: Eric who wrote (71058)7/25/2016 12:55:09 PM
From: Brumar89  Read Replies (2) of 86355
 
Inflation Adjusted Gasoline Prices



With the recent drop in gasoline prices many people have begun to wonder exactly how close to historical lows we are? Back in 1918 gasoline was $0.25 a gallon and by 1932 prices had fallen to 18 cents a gallon! But as we all know over the last 100 years the purchasing power of the dollar has fallen drastically so in order to get the true picture we can’t just say that the lowest price of gas was 18 cents per gallon, we need to adjust the price for inflation. When adjusting for inflation there are two prices… the first is called the “nominal price” and that is the actual price you would have paid for gas at the pump. The key price though is the inflation adjusted price which calculates what the price would have been if were were spending current dollars on a specific date. In this case, we are basing our calculations on the value of a dollar in December 2015.

In other words, imagine taking today’s dollars and jumping into a time traveling DeLorean and going back to a specific date in time. The inflation adjusted price (aka. the price in “real dollars”) is how much you would have to pay using the purchasing power of today’s shrinking dollar.

Lowest Inflation Adjusted Price of Gasoline–
$1.48 in 1998
DateLows
1931$2.65
1947$2.44
1972$2.04
1998$1.48
2009$2.54
2015$2.36
If we look at the chart below we see that in inflation adjusted terms, the first low occurred in 1931 as nominal prices fell from 30 cents a gallon in 1920 to 17 cents in 1931. Thus in 11 years prices fell 43%. But we have to remember that 1931 was the beginning of the “Great Depression” and overall prices fell 24% during the same period. As we can see gasoline prices fell much more than prices in general in the early portion. It is interesting to note that in January 2016 prices for gasoline on an inflation adjusted basis are actually much lower than they were during the depression.



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inflationdata.com
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