Friday, May 23, 2008

A Creative Definition of "Bargain"--Or Does This Writer Have a Point?

This headline definitely jumped out at me from the MSN frontpage as I finished checking my Hotmail: Why $4 gas is a bargain. Say what??? OK, let's hear the guy out:
The next time you have to take out a loan just to fill up your tank, remember this: Four-dollar-per-gallon gasoline is cheap.

There's no doubt that high fuel prices are hurting low-income consumers, and high energy costs are placing a tax on the economy that is slowing investment while sending billions of dollars overseas. It's unsurprising that presidential candidates and members of Congress issue new proposals practically every day for lowering gas prices: Stop filling the Strategic Petroleum Reserve! Suspend the federal gas tax! Open ANWR to oil drilling!

These proposals are delusions, and Americans are living in a fantasyland when it comes to energy and energy prices. Over the past few years, consumers have been inundated with news stories about the soaring price of gasoline. Invariably, these stories include comments from a motorist who is outraged at the evils of a) Saudi Arabia, b) OPEC, c) Big Oil, d) all of the above.
But by almost any measure, gasoline is still cheap. In fact, it has probably been far too cheap for far too long. The recent price increases are only beginning to reflect its real value.

(UPDATE: A Sunday DMN article largely blames investors for the constant uptick in prices.)

When measured on an inflation-adjusted basis, the current price of gasoline is only slightly higher than it was in 1922. According to the Energy Information Administration, in 1922, a gallon of gasoline cost the current-day equivalent of $3.11. Today, according to the EIA, gasoline is selling for about $3.77 per gallon, only about 20% more than 86 years ago.
OK, so maybe the prices didn't rise in proportion to everything else over the past several decades. But that doesn't mean that it doesn't hurt to have it go up so quickly all at once.

So, with the holiday weekend beginning as we speak, let's take a quick survey: Has the high price of gas altered your travel plans? Are you going a shorter distance, or simply staying home? Reply in the comments.

A Smart idea? If you're looking to downsize your vehicle in these high-priced gas days, you might want to know that the Smart Fortwo did extremely well in recent crash tests. I'd still hate to encounter an 18-wheeler in one, but for mostly city driving, it would probably be fine. (And by the way, Kevmobile 2.0 is doing really well with gas, having attained 36 mpg for a tank that was a hybrid of city and highway driving.)

UPDATE: A few days later, while listening to the Clark Howard radio show, the host was talking about the same Smart crash tests, conducted by the Insurance Institute for Highway Safety (IIHS). He also noted that there was one small car that the IIHS praised for being built for safety from the ground up. That car? The Honda Fit! The purchase of Kevmobile 2.0 just seems like a better and better idea every day...

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