Here’s yet another graph of gas prices, adjusted for inflation, taken from an article in the Sacramento Bee. In nominal dollars (the bottom line in the graph), prices are at their highest levels ever. But in inflation-adjusted dollars, gas is far less expensive than it was during the late 1970s and early 1980s, and also less expensive than it was during most of the first half of the 20th century.
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As the article mentions, a gallon of gas averaged US$2.07 since 1919, adjusted for inflation. That means that June’s national average price of $2.04 was a little below the long term average. So the recent price runup is, in one way of thinking, simply a reversion to the historical norm.
And as I mentioned in a previous post, gas is even cheaper today if you adjust it for our total incomes (much higher than our grandparents’, even adjusting for inflation) or for hourly wages, rather than just inflation. A gallon of gas still takes a smaller bite out of our paychecks than it used to. That’s not an argument for higher prices, of course—but it does suggest that we shouldn’t get too hysterical about today’s prices.