It's been interesting to watch the price of gasoline continue to set new records. The inflation adjusted price of $3.40 (with a 1980 baseline) has been passed. At current prices, we are spending about 3.5% of our income on gasoline, compared to 5% in 1980.
We are simply a more affluent society than we were 25 or 30 years ago. At $4 a gallon versus $1 a gallon, we are spending $45 a week more on gas. That's one meal out a week for most families. Not that much of a sacrifice, it appears.
Some have suggested that we raise gasoline taxes, as they have done in Europe. That's bad policy. Let the market handle it. So far, we aren't consuming any less fuel. Gas prices will continue to head north, driven by two primary factors. One is the move toward global price equalization. The other is simply demand.
As the price of gasoline in the states equalizes with gas prices globally, the price will begin to stabilize. The other factor is simply demand. Once we stop buying as much gasoline, prices will ease. Until either or both happen, we can expect a continuing increase in the price at the pump.
What's your take on the situation?
Until next time...
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