Seems that gas, fuel, gasoline is being used as a marker to understand just how horrible we have it as a result of the current inflation. It’s just sooooooooooo terrible. I’ll just say this. As a marker of inflation and our personal economic experience all it shows is how terrible we are at remembering. Unfortunately for us, such a bad memory leads us to terrible voting decisions. Though, it does allow for easy emotional manipulation of the citizenry come election time. Enough lecturing. On to the lesson. You can skip to the very end to see the results, but you’ll miss a great story.
Let us look at a bit of recent history. I used this site for historical gas prices: U.S. All Grades All Formulations Retail Gasoline Prices (Dollars per Gallon) (eia.gov) . I used this site for adjusting the dollar via inflation: CPI Inflation Calculator (bls.gov) Even if you do not trust the government, you can be rest assured that any deep state funny business will have been applied evenly. Today’s dollars is as of September 2022. The prices used do not include taxes, your experience may vary.
December 2001 was the lowest price for gasoline at $1.127/gal for the Bush presidency. In today’s dollars that would be $1.89. Yup, it was cheap by today’s price. Unfortunately for Bush, during his term the price hit $4.114/gal July 2008 which is $5.55 today. Ouch! That is a $2.987 increase in Bush dollars, $3.66 today. Must be all that government hand out. You don’t remember? He increased government spending in 8 years 53%.
“Between FY2002 and FY2009, discretionary spending rose 96 percent. “
“President Bush added thousands of new federal subsidy programs during his eight years in office. In 2008, there were 1,816 subsidy programs in the federal budget that spread hundreds of billions of dollars annually to special interest groups such as state governments, businesses, nonprofit groups, and individuals. The number of subsidy programs has grown by 30 percent since 2000 …”
Well, I guess not much different from what we’re hearing as an excuse today. Though I do not recall hearing Bush’s spending blamed for the gas price inflation. Interestingly, the average rate of inflation during his term was only 2.825%. The gas price was a 265% increase from the lowest to the highest in 8 years.
Just to have a simple comparison going forward, let’s use a ratio of price rise % to inflation rate. That is, how does the increase in gasoline price relate to the inflation rate. The bigger the number the greater divergence of the rise in gasoline price from the inflation average. 93.8 is Bush’s number.
Then came the big one. So terrible was the crash. In comes Obama to try his hand at wrestling the economy. Gas had dropped to $1.687/gal or $2.39 today by December 2008. I doubt all that Bush spending had suddenly dried up to explain the $2.427 decline in 6 months. However, for Obama the price started to rise and peaked at $3.96/gal or $5.20 today May 2011. A $2.27 rise in Obama dollars. Today’s dollars $2.81 rise. The low point during Obama’s term was February 2016 at $1.764/gal or $2.20 today. Just short of the low before he took office. And we know Obama was spending. After all, we had to get our self out of the “financial crisis”.
So, gas rose in 3 years from its low to high by 134.7%. All that spending and that’s all there was? Then it declined 55.45%. The average rate of inflation was 1.375. The comparison ratio for Obama is 100.14.
By the time Trump was to try his hand at the economy, February 2017 the price had risen to $2.416 or $2.95/gal today. So, he was handed off a good start. The price peaked in May 2018 at $2.987 or $3.56 today. It did a dip and peak then declined to $1.841 or $2.13 today by May 2020. Yes, low. By the time he was doing his January 6th party it rebounded to $2.42 or $2.75 today.
The average inflation rate was 1.875. With 2 peaks the first is a 23.6% increase. The 2nd from the lowest of his term to the end was a 31.4% increase. Using our comparison ratio we get 16.76.
It was around the time of Trump’s first gasoline peak he made a deal where there would be a 10% cut in world production in order to prop up the oil price as the companies were crying terribly so. It was a Russia, Saudi, US deal. Mexico was not keen to it. At the time, oil demand was down 35%. April 2020 oil was $23/barrel.
Of course, there was cheating (no honor among thieves) by Russia leading Saudi to threaten an increase of production which led to the price collapse. This led to a 3 ring negotiation with Trump threatening Saudi to cut its production or else.
“The threat to upend a 75-year strategic alliance, which has not been previously reported, was central to the U.S. pressure campaign that led to a landmark global deal to slash oil supply as demand collapsed in the coronavirus pandemic – scoring a diplomatic victory for the White House. “
You got that, right? Trump cut a deal to raise the price of oil. Looking out for the working Jane and Joe American just like those Carrier jobs.
“Conditions at Carrier now
In Indiana alone, more than 20 manufacturers have moved production to foreign countries since Trump took office, resulting in at least 3,000 job losses, according to trade adjustment assistance filings with the labor department. That’s about four times as many jobs as Trump saved at Carrier.
Today, about 800 workers whose jobs Carrier had planned to send to Mexico remain at the plant, but they are now required to work eight- to 10-hour shifts, seven days a week. Many haven’t had a single day off in more than a month.” 10/30/2020
But they “love” his policies.
So, cut demand and price drops. Cut supply and…
We have now arrived at the moment you have been waiting for: President Biden. In today’s dollars, we have gone from a low of $2.334 or $2.64 today to a high of $4.93 June 2022 declining to $3.70 in a 20-month period. Percentage wise, the rise was 86.7% and the decline has been 24.9%. The average inflation rate has been 6.5. So, using our ratio of peak % rise to inflation we get 13.33.
We can now discover just how poor our memory has been. Remember, the greater the comparison number the less the gasoline price rise relates to the rate of inflation. The comparison ratios are as follows:
Bush 93.8: gasoline % rise 265 in 8 years, today’s dollars $5.55/gal
Obama 100.14: gasoline % rise 134.7 in 3 years, today’s dollars $5.20
Trump 16.76: gasoline % rise 31.4 in 8 months, today’s dollars $2.75
Biden 13.33: gasoline % rise 86.7 in 18 months, today’s dollars $4.93
To borrow a movie line: What do you think now dear?
I think I need to look at the change in the price of a barrel of oil vs the price of a gallon of gasoline.
“Less Oil Production and Higher Gasoline Prices, Why?” Angry Bear, angry bear blog