The Illusion of Exceptionally High Gas Prices
Living in Iowa my entire life, I can tell you that there are three things that Iowans love talking about: the weather, corn, and the price of gas.
Following Russia's invasion of Ukraine, gas prices spiked to a nationwide peak of $5.02/gallon on June 13, 2022. Since then, the price of gas has been coming down, but the discussions about it have not slowed at all.
Many believe that the price of gas has never been this high. That’s true in one sense: the price per gallon has never before been over $5. However, over the last 40 years, the combination of inflation and the increased average fuel efficiency of cars and trucks has kept the cost of driving lower than the price of gas would seem to indicate.
Here's an explanation. Using inflation adjusted dollars, it cost almost 30 cents to drive a mile in 1980. That's partly due to inflation, but it's also due to the fact that cars got less than 16mpg in 1980. Using the same price per mile calculation today, the cost of gas would have to go over $7.00/gal to match the levels seen in the early 1980s.
The price of gas is not something within our control as individuals. We can drive less. We can own more fuel-efficient vehicles, even fully electric vehicles. But, having a financial plan is within our control. If you'd like help in establishing a financial plan (or want to discuss the price of gas), give us a call.
Sources: American Automobile Association (AAA), US Energy Information Administration (EIA), Bureau of Labor Statistics (BLS), US Department of Transportation Federal Highway Administration (DOT FHWA), Foster Group calculations