As I look out my office window this morning in northwestern Illinois, the leaves on the trees are bright red and yellow, the frost is literally on the pumpkin, the temperature has dropped into the 30s and the price of gasoline at the Shell station down the street begins with a 2.
One of the ways old TV shows and movies date themselves is the price of gasoline posted at filling stations. Recently I watched a 1997 Jack Nicholson movie on TV and the price of gasoline was $1.13. The next day as I drove past the Shell station I noted that the price was $3.79 – an increase of 235%!
As a national average, we have flirted with $4.00 gasoline twice since the turn of this century. The first time was in 2008 when the national average exceeded $4.00 a gallon during the months of June and July. Then a second time in May, 2012. And I know that for many of you in specific locations around the country, $4.00 plus gasoline has been the norm.
The most volatile period for gasoline prices was the 8-month period from July, 2008 when the national average was $4.16 to February, 2009 when the price dropped to $1.94. Isn’t it amazing how quickly we forget these things. That was a decline of 53.4%! Of course, we were entering the worst recession since the Great Depression.
Let’s take a quick look back over the last century to see what has happened to gas prices.
- In 1919 gas prices were 25 cents a gallon. There weren’t many cars on the road and they were still a relatively new invention.
- In 1946 there were 46 million vehicles on the road but gas was still 27 cents.
- In 1974 the average price of gas went above 50 cents for the first time in the United States.
- In 1980 the average price rose above $1.00 for the first time.
- In 2000 the average price rose above $2.00 for the first time.
Here is the average price for regular unleaded gasoline in the U. S. during November from 1993-2013.
We are all well aware of the factors that affect gasoline prices:
- World-wide demand for crude oil and gasoline
- Available supplies of crude oil
- Refining capacity
- Distribution costs
- Changes in seasonal demand
- Gasoline taxes from state to state
But two dramatic changes are taking place in the United States that are affecting the price of gasoline.
- North American crude oil production is booming
- Average gas mileage per vehicle is increasing
Just turn on the news and you can hear about locations in North Dakota that have become boom towns where the unemployment rate is the lowest in the nation and high demand for labor means high wages and even higher prices. Or you can listen to the debates over pipeline production from the Canadian oil fields to the United States.
Like most Americans, trading vehicles now means better gas mileage. My current car is a Toyota Prius that averages over 40 miles to the gallon and holds only 11 gallons with a range of 440 miles or more. Two cars ago, I was driving a Chevy Trailblazer SUV that got 16 miles to the gallon and held 20 gallons with a range of only 320 miles. Multiply that dramatic change by millions of Americans and it is easy to understand why foreign oil imports are dropping steeply and the Middle East is very concerned about their economic future.
Only time will tell if these factors keep the price of gasoline down or at least help slow the increase. By next June the price at the Shell station may once again start with a 4, but for the moment that price starts with a 2 and I was able to fill up my Prius for $32.89.
While you are considering how to present these economic realities to your students, why not take a few moments to review our financial literacy titles that are designed specifically to prepare them for life in the real world.
Charles Wilkinson, Publisher