By Tim McMahon, editor
It is extremely difficult to decide how over or under priced a commodity is when the scale we are comparing it to is constantly changing. By adjusting for inflation we can see what is happening to the price much easier. It pays to know what prices are in “Inflation Adjusted Terms”. Once we adjust the gasoline price for inflation we can see that the average price for a gallon of gas since 1918 in June 2010 dollars is $2.39. So it is easy to tell whether gas is currently “cheap” or “expensive”.
For instance, the Annual Average gasoline price for 2009 was $2.34, which was extremely close to the long term average price of $2.39. While in 2008 the annual average price was $3.26 with peak prices over $4.00. So even when adjusted for inflation gas prices were high in 2008. For more information on Inflation Adjusted Gas Prices see the article on InflationData.com. You will see an inflation adjusted gas price chart which shows the “nominal” or actual price that you saw at the pump compared to the inflation adjusted price (called the “real” dollar price) .
To get a bit bigger view of the overall energy situation you might want to look at the Inflation Adjusted Crude oil price Chart and an article which shows oil prices adjusted for inflation in June 2010 dollars. Adjusted for inflation in June 2010 dollars the 1979 $38 peak oil price is the equivalent of paying $107.99 today. (Note: This number is constantly changing as we adjust for inflation at the current moment.)
However, in the 2008 price run-up, the annual average crude oil price for all of 2008 was nominally 91.48 and fell much lower in 2009 to an average of $53.48. So on an annual average basis, prices were very close to 1979 but slightly below, but on a monthly inflation adjusted basis 2008 prices actually exceeded 1979 prices for a short time. There is two different ways of looking at this information. The first is an inflation adjusted crude oil price chart and the second is as an inflation adjusted crude oil price table.