Dedicated to the balanced discussion of global warming
A little departure from the typical columns on this site. Rather than simply discussing an aspect of global warming, I am going to discuss a related topic – gas prices. There are quite a few articles out there on the discussion but I think I have a different perspective for everyone to consider.
First, how bad is it? Yes, I know that at the time of this writing, gas is over $4 a gallon (just filled up last night) but perhaps we need a reality check. The good folks over at InflationData.com compiled a table of average crude prices which they also inflation adjusted for 2007. I have combined that with a chart from WiseGeek that details the price of gold. Since the WiseGeek site stopped at 2000, I put in the price of gold at the end of 2007 from Goldprice. I also added today’s approximate pricing for gold (Kitco) and oil (MSNBC).
|Year||value of one ounce of gold||Nominal||Inflation Adjusted 2007||Oil price in carats|
Based on this simple analysis, the price of oil has been pretty stagnant for the last half of the 20th century. We seem to have just gone through a short term low in the early to mid 90s. Even as recently as 6 months ago, the price of crude was very similar to the prices from 1960 to 1985 when it actually dropped.
I am well aware that gold is not the standard of currency in today’s modern world. That actually makes the problem worse. Most of the oil producing nations tie their currency to the US dollar, so when our dollar drops so does the riyal and this causes their economies to import inflation from other countries.
The advantage of using gold in the “price” though is that it averages against all currencies and all nations. This tells us what is really happening with the price of a commodity compared to another commodity.
All that being said, the real pain for the price of oil is that it (and gold) have spiked so dramatically. The price of crude has increased approximately 500% in the last 8 years. This dramatic change could be called a correction for the very low prices of years gone by, but all corrections in pricing tend to be very challenging for the budgets of companies and individuals.
In the next few articles, I will discuss ways to reduce the amount of gas that you spend today. I am not going to suggest that you run out today to buy a hybrid vehicle as most people cannot adapt that quickly to this rapidly changing marketplace. Rather, we can discuss ways to help.
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