Gas Prices Highest Ever?

(And Why Blue Staters Pay More at the Pump)

Are prices at U.S. gas pumps at all-time highs? The mainstream media (MSM) headlines would have one believe so:

Gas Costs Hit Record High, More Hikes Seen AP 3/21/05
Record-high gas prices seen rising further MSNBC 3/21/05
State gas prices hit all-time high Seattle Post-Intelligencer 4/7/05

All of which has had the left screaming that this 'record-high' is 'Bush's fault' and somehow proves the war in Iraq was a 'war for oil', at the behest of oil companies, which have favored Republican candidates in their political contributions for decades.

To MSNBC's credit, for those who read beyond the headline of the above story, its subhead is, "But adjusted for inflation, nowhere near highest ever", and MSNBC then goes on to point out in a graph that, in constant dollars -- the only valid comparison, a gallon of gas cost more from the late 1970s through the mid-1980s. Looking further back, the below official U.S. government data show that the price of gasoline is not at historically high levels; it's at historically average levels, as this chart indicates (nominal price / real [inflation adjusted] price):



The U.S. Dept. of Energy's Energy Information Administration goes on to predict that the real constant-dollar price of gas will fall in 2006, although its nominal price will rise, due to inflation.

In short, gas-price hysteria generated in part by sensational MSM news headlines, and in part by pandering politicians, isn't justified. Especially when one also recalls that:

• Each gallon of gas includes an average of 44 cents in federal, state, and local taxes, a far cry from "what [Democrat] Franklin D. Roosevelt had in mind when he asked Congress in 1932 to impose a one cent per gallon federal excise tax on gasoline as a 'temporary' revenue measure designed to offset shrinking income tax receipts as the economy moved into depression". To the extent gas prices have increased, it is mostly due to increased taxation.

  * Senator John Kerry, of course, once suggested a 50 cent per gallon additional federal gas tax, which would have cost the average family $600 per year; he also voted for Clinton/Gore's 1993 4.3 cpg federal gasoline tax increase.

• In comparison to Europe, where gas typically sell for 3 to 4 times as much, U.S. prices are cheap. Crude oil is the same price worldwide, so the difference can be found in the tax rate: In the United States, roughly 31% of the price of gas goes to taxes; in Europe, as much as 78%. Taxes also account for much of the regional variation in gas prices. Why do blue state drivers in California pay more than red staters in Utah? Greater environmental regulation and higher taxes.

  * One Peoria, Illinois gas retailer details -- and updates on a regular basis -- the impact of taxes on their gas prices here (and notes the generally lower taxes on gas sold in neighboring red and "purple" states).

• President Bush and the Republican Congress have approved drilling in the Alaska's Arctic National Wildlife Reserve (ANWR), which, despite all controversies regarding how much oil is there (only drilling will answer this question definitively), at least can't help but increase supply and reduce our reliance on imported oil. Plus, those closest to its impact, Alaskans and Eskimos, support opening a small portion of ANWR to energy development.
  
  
• The removal of Saddam Hussein from power in Iraq will likely help to stabilize this oil-producing region, reducing uncertainty of supply and smoothing, if not reducing, prices:

  A single event - such as a strategically placed bomb in Iraq or Saudi Arabia, or sabotage at a U.S. refinery - could spark global shortages.... The potential for scarcity drives up the price of oil.
  

  Today's high gas prices have many roots Knight-Ridder 4/7/05
  
  
• Increased demand from growing economies in Asia and a maze of state-by-state regulations also play roles in gas prices (Newsweek 4/18/05).

[Updated 4/11/05]