Gas Prices and Inflation
Long-time readers will know that I have explained that the primary cause of inflation is government spending. A check from the government will never bounce. This is true whether it is a stimulus check, Social Security check, or a subsidy check. The reason that my holographic Charizard card is so valuable is that there are very few of them. However, if all of a sudden they started making more of these, they would soon be worthless. The same is true of money. And if you have ever mentioned high prices, you will hear me blame the Federal Reserve, which controls the monetary policy of the country. However, please do not get me started on that rabbit trail, or we will be here all day.
Now, since I am talking about gas prices, which everyone seems to be doing these days, there are a few other things that need to be addressed. Many factors can affect the price of gas outside of inflation. When more people are travelling, the price of gas goes up because of supply and demand. On the other hand, drilling for oil domestically or building a pipeline to facilitate the flow of raw materials will lower prices. There is also the question of how much oil is coming out of the Middle East, which affects the price. If you put all of these factors together, it is foolish to look at one of these factors and blame the price of gas on any one factor.
However, inflation is a hidden tax that causes the price of everything to go up. It is not that everything used to cost a nickel; it was that the buying power of the nickel based on the gold standard was higher. Simply printing more money, much like printing more trading cards, devalues it.
I found this chart online and fact-checked it myself. The source is the government’s own data for the price of gas. As you can see, if you account for inflation, the price of gas is actually higher under some administrations and lower under others. This changes the conversation. For example, the highest price of gas under President Barack Obama’s administration was $4.00. However, if this is adjusted for inflation, today the same gallon would be sold at $5.85. This means that the price of gas is more complicated than initially perceived. By applying standard inflation adjustments to these historical figures, we can effectively strip away the ‘noise’ of declining dollar value, allowing us to see which energy policies actually delivered more value to your wallet.
The price of gas is affected by many things, but this chart takes out the inflation variables and puts them to the side. What we see is that the other factors that I mentioned, such as travel, domestic drilling, and pipelines, significantly affect the price of gas. When you go to the pump or buy anything, do not forget that the price of gas counts in delivering whatever it is to the store, but inflation hits before the pump. Ultimately, energy costs serve as a barometer for national health. When the baseline cost of moving people and goods rises because of deliberate policy choices, it is the family budget, not the global market, that bears the brunt of the decline.