Gas Doesn’t Cost More . . . Our Dollars Are Worth Less

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Did you know that gas is cheaper now than it was 50 years ago?

It may not feel it . . . but:

Find an inflation calculator; for example the federal government’s Bureau of Labor statistics Consumer Price Index calculator (here). Select 1965 as your starting year. Enter 30 cents – the cost of a gallon of gas back then (here). Then select 2016 (2017 data isn’t yet available) and – look at that – $2.29.

About what a gallon of unleaded sells for today.

Actually, it sells for less – because a chunk of that $2.29 you’re spending isn’t for gas.

It’s for taxes.

Which are high – and (as authoritarian leftist “progressives” like to style it when it comes to everything else) extremely regressive. They are disproportionately high relative to the price of the item itself. An item that is a necessity for most people.

On average, the price of a gallon of gas includes about 48 cents in federal and state/local taxes. The gas itself really costs about $1.80.

That’s about 24 cents in 1965 money.

And it’s actually less than that – because much of what you are buying today isn’t gas – or taxes.

It’s ethanol.

Ten percent of each gallon, in most areas.

Gas was gas back in 1965, no adulteration. It took you farther, too – because 100 percent gas has more energy in it than 90 percent gas and 10 percent ethanol. The Corn Con costs us up front – and down the road.

Gas was also not as expensive to refine – and distribute – as today. In part because of the Corn Con (corrosive, water-attracting ethanol alcohol requires special handling) and also because of regulatory costs that are much higher now than they were back then.

That goes doubleplusgood for diesel, which is much more expensive to refine today than it was 50 years ago. Federally mandated Ultra Low Sulfur diesel fuel often costs more than premium unleaded.

But gas is cheap.

Cheaper than it used to be.

It’s hard to know, exactly, because of all the variables in play, but there can be no doubt that despite the taxes, the regulatory add-on costs and the Corn Con, a gallon of gas still costs less today than it cost more than 50 years ago.

This is even more astonishing when you take into account the fact that the population of the country has more than doubled since 1965 and along with it, the number of cars on the road and the driving being done. More fuel is being consumed today than 50 years ago – and not just fuel, either. Demand for everything else made out of or otherwise dependent on oil – which is almost everything – has also increased.

Now fold in world demand – which has probably doubled if not quadrupled. China, just to cite one huge variable, was a mostly peasant country back in 1965 that ran on rice – not oil. It is not a peasant country today. GM sells more cars there than it does here.

Yet gas is cheaper than it was back when Lyndon Johnson was president – and Mao was chairman.

If the world is really running out of oil – Peak Oil theory, always just around the corner – it follows that the actual cost (i.e., adjusted for inflation) of gasoline should be going up. You don’t generally pay less for things becoming scarce. Especially when demand for them is high – and likely to rise.

Whether because advances in technology have made formerly economically unreachable oil economically recoverable or because new fields have been found that have greatly increased the available supply or (longshot, but it’s possible) oil is actually abiotic – and so, renewable – there appears to be plenty of the stuff on tap.

Don’t sweat supply.

Sweat the taxes – and the money manipulations.

A gallon of gas only appears to cost more because you need more paper dollars to buy the same thing now vs. then.

Even with the regressive taxes folded in. Despite the higher costs involved in refining it and getting it to market. Plus the cost of the Corn Con. 

If it weren’t for those things, gas would be literally cheaper than water, probably.

But in real terms, it is still cheap. Or at least, it doesn’t cost more now than it did back in ’65.

So, the next time you fill up, don’t curse Big oil.

Condemn Uncle . . .  and the Fed.      

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37 COMMENTS

  1. The reason behind gas costing less today? Capitalism.

    Exxon makes profits based on what they can sell their product for, less the cost of what it took to make it ready for market. So over the decades, they got better and better at producing it for a lower cost.

    • Yup. In fact, way back in the 19th century, when Uncle decided he needed to’protect’the people by breaking up the evil monopolies, the prices of steel and kerosene (the main petroleum product at that time) were going down, either despite, or perhaps because of, Andrew Carnegie and John D Rockefeller.

      • Any company that grows to dominate a free market has to keep prices low enough to discourage others otherwise competition shows up.

  2. I noticed that the first big oil shock in 1973 happened not long after:

    The US took silver out of coins (1965)

    The US embarked on a large scale war while vastly increasing social welfare spending (1965)

    Currency stopped being issued by the Treasury in the form of silver certificates and United States Notes (1966)

    Silver certificates stopped being redeemable for silver (1968)

    The US closed the gold window by ending foreign exchange for gold (1971)

    Oil prices went down once:

    Reagan deregulated oil prices (1981)

    The Paul Volcker-led Fed cranked interest rates past 20 percent (1982)

    And ever since then, oil prices spike every time the Fed goes on a Monopoly money-printing spree.

    Most recently, gas went below $3 a gallon after the Fed started raising rates.

    So it’s not a gas price problem, it’s a money value problem.

  3. In the 70’s debacle of ‘not enough petroleum’ I couldn’t make money hauling regular freight so I leased my truck to a company in the oil field. While people sat in lines in big cities waiting for gas, we shook our collective heads in west Tx. and ran day and night hauling everything you can dream of as far as getting petroleum out of the ground since the price was high, to say the least.

    Guys I knew hauling fuel joked to not leave the bathroom window open or you’d come home to a tub full of gasoline. They filled every receptacle they could find in order to store fuel and act as if there really was a shortage. But we had so much petroleum and so much refined fuel and so much refining capacity it just wouldn’t fly.

    Oil companies were paying premium prices for land to speculate on. Texas Railroad Commission makes some strange “rules” and one was a potential producer could only sit on a lease for a year without having drilling equipment on it. My BIL at the time had an old chugger driller rig for digging water wells of which he and I dug plenty. He was approached by an exploration company to lease his rig to them. He drove it out to their lease, raised the derrick and left it sitting and got paid a lot of money without ever firing it up…..as if you could get oil at 200’……but it satisfied the onus of having a drilling rig on the lease.

    I recall diesel price doubling in just a few months but never a shortage of it. When we O/O’s actually had a strike we had the solidarity of the public and the MSM behind us. There was talk of using military force to make us haul again so every trucker loaded his guns and said “go to hell” and the public backed us. There was a call all over the country to back our strike and it worked to some extent except for large companies who the govt. obviously supplied cheap enough fuel to make money and kept the grocery store shelves stocked for the most part but even that was affected.

    That would never work again. The MSM wouldn’t support us. The govt. would use their heavy hand to have bankers demand unreasonable payments such as paying off your rig “right now” no matter that wasn’t what the contract with the bank says. There’s no loyalty to one another in this country anymore. We’ve been divided to the point of every small group being pitted against another. Hitler would be proud. Mussolini would be ecstatic. What am I saying? Schumer is or would be ecstatic if we didn’t even have a gun to defend the home. It was during RR’s reign, the righteous old boy of freedom, cough cough, gag gag the DOT passed a law so truckers couldn’t defend themselves. Back in that time it was common for DOT to man the stations and search every truck…..for drugs. That drug thing sure has come in handy for every lowdown, POS, law enforcement agency in this country and fairly much the entire world.

    • My dad was working in an oil refinery in Wyoming in 73 and told me the same story. While the propaganda was bleating and blaring about a gas crunch, a shortage, etc., their tanks were dangerously overfull and they didn’t have any place to put the stuff.

      • I remember back then an oil storage tank in Quincy, MA actually burst it was so full. Luckily it was number 2 oil, not gasoline or it would have been quite the disaster. Of course that put the lie to the so-called oil “shortage”, just a bs way to raise prices without the sheeple bleating too loudly. Other businesses quickly caught on, because after that we had a sugar shortage, toilet paper shortage, and various other “shortages” du jour. What a total crock!

      • My dad worked for a major oil company back then too hauling gas to gas stations. There were not the restrictions like today so he was working almost non-stop seven days a week. He laughed at the idea of a “shortage”.

  4. I remember the peak oil scares. Never heard a word about running out until 1973, then because of OPEC screwing with us we got the peak oil scare. I’m a little too young to really remember much of that time, but I do remember that’s when the cars started to get much much smaller and a lot less interesting.

    Back in the 00s I read a really boring book called “The end of oil” which was yet another peak oil book. The author, who had a heck of a good agent, was all over TV and NPR screaming about how we have to move on to something “sustainable” (i.e. more expensive) because we’re eventually going to run out. This was real Steven King level scare tactics, but presented as “factual.” Lots of hockey-stick graphs and charts. Now peak oil doesn’t work the way that most people think, where the oil just stops coming out of the pump and you hear that sound your kid makes when he gets to the bottom of the milkshake. His definition was that eventually it will take more energy to get the oil out of the ground than it will yield. The author totally missed the fracking revolution and more importantly didn’t understand that getting electricity to run your drills and pumps isn’t all that difficult or expensive, especially when going with a super low cost production method like nuclear. In other words, technology advances despite your inability to see it coming. And even if it were the case that energy extracted is less than what’s input, there’s a big upside to keeping the paid-for infrastructure and advantages of liquid fuels.

  5. “longshot, but it’s possible oil is actually abiotic – and so, renewable”

    Longshot? No more of a longshot than oil coming from dead reptiles. I understand eons of time and sediment build-up but, please explain how all those creatures (with enough mass to fill tanker upon tanker with their deceased ooze that’s all buried in one big graveyard) could be a mile below the ocean floor.

    If you think petroleum comes from dead dinosaurs you probably believe Lee Harvey Oswald acted alone.

    Dr. Thomas Gold was probably right, thus the general ignorance of his theory.
    https://www.amazon.com/Deep-Hot-Biosphere-Fossil-Fuels/dp/0387985468

    • Gold was absolutely correct an proved it and since then the Russians have been proving it with ultra-deep wells. There is not way to explain dead dinosaur oil occurring at 35,000 or deeper beneath the surface of the Earth.

      It was no Gold’s ideas however, he was just one of the few western scientists who could read Russian. The Russian Ukrainian Deep oil and Gas Theory was in open literature since the 1950’s and has been demonstrated over and over again. The west does not want to admit it, because no one wants to be invested in a virtually unlimited and inexpensive resource, but this is common knowledge in the oil companies and they are using that knowledge to find new places to drill, which explains why oil reserves always seen to increase year to year in spite of the “experts” all telling us “Peak Oil” is coming next year, it is always “next” year.

    • All the possibilities for the very deep oil turn conventional “wisdom” on its head.
      1) The hydrocarbons were formed with the planet.
      2) The hydrocarbons are formed by living organisms deep in the earth.
      3) The earth is growing in diameter.
      4) Hollow earth, biomass from the interior.
      5) catastrophic large scale movements of crust plates.

      I could go on if I keep thinking about it, but every option goes against some sacred belief of “science” to explain the deep oil. Thus nobody is supposed to talk about it or make the connection that it just doesn’t make sense that dino guts and plant matter being that deep conflicts with other things we are told are facts.

  6. Just be happy you live in the USA where gas is cheap. I recently moved to Slovakia to a village (Rencisov) in the middle of nowhere. Gas over here is 1.33 Euro a liter. This converts to $5.30 a gallon! It is actually real gas though. No corn-con here, just taxed beyond belief. Strangely, diesel is cheaper here, about 1.17 Euro a liter. Also, I moved here from the orange juice capital of the world, Florida, but have found that orange juice is actually cheaper here 75 cents a liter compared to over a buck a liter in Florida. The Slovak Government taxes basically everything at 20%, so try and explain that one.

      • Diesel’s cost with regard to sulfur content is based on the crude it is made from. In Europe the crude used is much easier to produce a low sulfur content fuel than it is in the USA if I recall correctly. It’s been a few years though.

        • BrentP, West Texas Intermediate is a light, “sweet” crude that is easily turned into fuel. It’s a boon for the refiner but there’s an old saying that’s still true to this day. The closer to the wellhead, the more expensive the fuel. Of course the tax on a gallon of refined fuel in Tx. is over 50 cents. That obviously wasn’t true back when I could buy “high test” for $.22/gallon. If all the “road tax” for fuel in Texas were kept in the road fund we’d be driving on super slabs to my driveway.

      • Eric,

        I think you are correct about the sulfur content. I don’t see any signs indicating “ultra low sulfur content” like you do in the USA. Most stations do sell 2 types of diesel fuel though, a regular one, and then some “High Performance” one.

        I am ordering a Dacia Duster 4X4 with the 1.5 liter Diesel engine. It averages 4.7 liters per 100km which converts to 51mpg. You can pick up a fairly loaded one for about 16,000 Euro ($16,800) brand new. Of course these are verboten in the USA per the dictate of Big brother. https://en.wikipedia.org/wiki/Dacia_Duster

        • Hi Rush,

          Yup… if only more Americans knew such vehicles existed (and began to wonder/ask why it is that “their” government denies them the option to buy such).

          How is it over there, generally? Lots of people here – me among them – have given at least passing thought to getting out before it gets to be too late.

          • Eric,

            The cost of living is lower. Groceries, medicine and such cost less than America, but the pay here sucks. My son works full time in a warehouse, and makes 700 Euros a month. I believe that is way below the poverty line in the USA.

            I live quite well over here. I spent 23 years in the USAF, so my pension is over double what a lot of workers make a month. How much longer my pension lasts before Uncle Sam comes to the realization that he is bankrupt and can’t pay military pensions any longer is the big question. I also have a rental property in Florida that is paid for, so I have another source of income, but it too is tied to the dollar. I live far enough out in the sticks (look up Rencisov Slovakia on Googlemaps) and have enough land that I could be semi self sufficient if I needed to be. A lot of people still raise pigs, chickens and rabbits for meat over here. Plus, the countryside is infested with deer. I have seen a herd with over 100 deer recently.

            I don’t think the EU has much longer to live, and the USA has problems too with the leftists on both coasts, and the “normal” Americans in the Heartland heading in opposite directions. We definitely live in interesting times. It will be interesting to watch the break-up of the EU in the next few years with a front row seat. I hope it does not become violent. Slovakia is a small country with only about 5.5 million people. The government is not omnipotent like DC. The government here cannot do as much damage as DC can. I’ll take my chances over here for now, and see how it goes. Slovaks are wonderful, caring people, but I would not recommend living here unless you understand the language.

            • I think that is something that most of the less expensive countries have in common. Yes they are cheaper as long as you can still make American wage. Possibly that would work for Eric but for the average person who has to get a job, you are kinda screwed.

        • Rush, that “high performance” diesel is simply No. 1 fuel, i.e., kerosene. It does have a higher cetane rating. It used to be common but not to be found in most places now.

          When my cousin, also an ex-truck driver and i went to Mexico you could tell by the exhaust it was No. 1. Cuz says, “the diesel smells like kerosene”. No. 1, I replied and that’s what we’ll be running as soon as I stop for fuel.

          Don’t know why it was common in other states and rarely seen in Tx. Now I don’t see it at all. In fact, nearly everywhere I fuel(T/A, Love’s/Flying J)has biofuel blends and it’s not an advantage in any way I have seen. It certainly gets less mileage than pure No. 2 fuel.

    • Rush, not trying to be nosy here but may I ask why did you move to Slovakia? I only ask because I am seriously considering getting out of the US and never considered Slovakia. Your take on Slovakia would be greatly appreciated.

      • My wife was born here. We have owned our house here for about 12 years, but only visited during the Summer. I am fluent in Slovak. For me, it was like moving down the block. The main reason I moved here was I saw my wife was happier here than in the USA. To me, it made no difference living here or there as long as I got an Internet connection which is only 11.50 Euro a month here along with 3 Euro a month for satellite TV. Sure beats the hell out of the $145 I was paying in the USA for Internet and Cable. I would not recommend moving here or anywhere unless you were fluent with the language. I lived in enough countries during my tour in the USAF where I couldn’t speak the language, and it was a pain. I make more here with my USAF pension than the poor people who work full time. As long as the dollar doesn’t crash, I am good.

  7. As I stated before, convert the today’s price into traditional 90% silver US coin.
    I saw $2.399 on the way home from work so I’ll use that. coinflation reports the silver only melt value of a 90% silver quarter to be $3.2462. So 2.399/3.2462*$0.25 = $0.185

    Gasoline with full lake county Illinois taxes applied is eighteen and half cents per gallon in real money.

    • “traditional 90% silver US coin” that coincidentally ended in 1964, the year before Eric picked as his benchmark. And the year after JFK was shot. Although they did keep some silver in the half-dollar that bore his likeness for 5 more years.

      • Hi Phillip,

        I am just old enough to vaguely remember my grandfather showing me redeemable in silver and gold U.S. dollars. I haven’t seen either, of course, in decades.

  8. There are states like Illinois that are basically taxing you on the gas taxes you have paid on gasoline. Basically you pay a gas tax (fed, state, county, other local tax) on the gallon of gas, like you do in all the states. Then they charge you the regular sales tax (that is applied on almost everything you buy). No, gasoline is not exempted because of it’s own specific tax, you pay twice (so your paying part of the sales tax on the gas tax you have already paid, not gasoline). It’s a complete ripoff, because you pay on the whole amount, not just the gas portion of the bill.

    More details at the link.

    https://www.illinoispolicy.org/hosed-at-the-pump-illinois-gas-taxes/

    I know it from a few years ago, but nothing has changed in Illinois.

  9. Nobody understands inflation. Most people assume it’s a rise in prices. Wrong: inflation is an increase in the money supply, which devalues the money, which in turn drives up the prices. You see the effect, but never the cause. It’s also called the “silent tax” because those who get access to this new money first, before the market realizes there’s more money circulating around and adjust prices accordingly, wins. So who gets the money first? Banks and governments, usually. Who gets it last? You and me. Call it “trickle down economics” if you will.

    • Amen! The pols think they are smarter than the market, but eventually the market stops buying the worthless bonds that “build” the Inflation Mousetrap.

    • “Whilst workers will usually resist a reduction of money-wages, it is not their practice to withdraw their labor whenever there is a rise in the price of wage-goods.”

      Keynes, John Maynard. The General Theory of Employment, Interest and Money (p. 7).

      This is all you need to know about inflation. As worker productivity increases, prices fall. But people don’t like pay cuts, so instead the so-called “elites in charge” who all bow down to Keynes (mostly because he told them what they wanted to hear, namely that they were smart enough to centrally plan an economy) intentionally devalue the currency. Also has the side effect of making a cost of living adjustment look like a reward.

    • Eduardo(strange, I was just reading a Koontz book and one of the main characters name is Eduardo), wouldn’t it make more sense that banks only let govt. have the devalued money putting more of the onus of keeping up govt. with more tax? Cost of living adjustment, wow, hadn’t even thought about that in decades. I haven’t had a cost of adjustment come my way since 1988.

      • I work for a company that does its best to keep the unions out, so we get annual reviews. As long as you didn’t kill any customers or chop down a utility pole you get a “merit increase.” But the spread between turning water into wine and keeping the office chairs firmly on the ground usually isn’t more than a percentage point, so basically it’s a COLA.

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