One of the main (but not only) reasons why we own the car is the mileage.
Even though the last year showed spiking prices for gas, here is a long term perspective of the cost (red line is adjusted for inflation) that tells a different story.
I've long argued that the cost of gas has been relatively inexpensive over the long term, trailing nearly every other commodity that we regularly consume. This doesn't factor in the efficiency (13-15 MPG was standard in the 1970's) of the vehicles.
The chart below show that over the last 60 years, the price of gas, on an inflation adjusted basis, has been virtually flat (around the $1.50-2.50/level) with two, relatively short term, abberations.





This is not a projection of the long term expectations for the price of fuel, but rather just a longer term illustration.

 

Well, let me look at this whole picture another way: as far a I remember inflation rate is calculated, based on price increase of basket of products people buy on everyday basis, more or less. Part of that basket would be gasoline itself, I would imagine. It gets more interesting if you think about it a little more: just about any product you buy uses energy to make it, therefore increasing cost of energy (of which oil is a large part) would tend to increase cost of most products, especially those requiring high energy input and therefore increase inflation. Of course energy cost is not the only driving force behind inflation, but it is part of it. So, you're comparing price of gas adjusted for inflation, which in itself is affected by price of oil/gas. In other words, regardless of oil prices going up or down, adjusted for inflation price of gas would be more or less flat because over the years, it will drag inflation behind it in the same direction as well. I don't have exact numbers, but for example airlines spend close to 50% of all their expenses on fuel. So, oil goes up, airline tickets go up, increasing inflation and therefore keeping the price of oil adjusted for inflation more or less flat. It is not 1:1 ratio and not every product requires such a high energy input but I hope you can see that things are not as clear as they originally may seem. To make things more complicated, past does not tell us about the future. Right now Alaska produces 50% less oil than just 10 years ago, Dubai expects to run it's oil wells dry by around 2016 and they try desperately to open new industries in their country for the oil less future etc. etc.. In other words, don't get fooled by $50 a barrel oil, the economy slowed down so did oil consumption. As soon as economy starts picking up, oil consumption will increase and oil prices will go up and if supply doesn't meet the demand, which BTW we were close to last summer, you think $147 a barrel was expensive? Economy is in the dumpster and it may take 1-3 years to recover, but if we don't lower oil consumption, especially in US which uses 25% of world oil production with less than 5% of population, things could get very nasty.

 

FWIW, most measure inflation based upon 'core' inflation. This figure excludes food and energy costs. I don't know what basis was used here. The post wasn't meant to make a definitive statement one way or the other, but rather to provide the perspective of a driver who has seen highs and lows over the last 30+ years.
Simply put, and in my humble opinion, compared to all other costs, the cost of fuel for driving, over the years has been pretty stable (nonwithstanding the recent spikes).

 

I've made the same argument Haroldo did a few times, and when I point out that the recent increase in gas prices is GOOD for the country in the long run, I'm usually met with disbelief, if not outright hostility. People are too short-sighted to understand that the higher prices are what make it economically viable to explore our own resources and alternative energy options, which is the last thing that OPEC wants us to do.

Our country is addicted to oil, and we get most of it from the "dealer" across the ocean. Since we ran into economic trouble, they've been kind enough to lower the cost back down to where we can still afford it, thereby keeping us hooked.

 

...and if 'they' don't lower the cost, Congress will hold hearings to find out why the price of oil is so high. The political class wants fuel effiency, but they fail to understand that there is only one force strong enough to foster conservation, the basic law of economics...prices rise and consumption goes down.
I imagine SUV sales will pick up. Maybe not today or tomorrow, but in a few months, when the gas spikes are a distant memory. Happens ever time.

 

That "dealer" across the ocean doesn't control the price directly. They try to, by decreasing (or increasing) the barrels they produce per day...but the price of crude oil is determined by the investors that buy and sell crude-oil futures. It is very complicated, but I see it as "smoke and mirrrors", just like the stock market.

 

Actually, OPEC provides a very valuable service.
They try to keep the price relatively stable.
Were there no price co-ordination, you'd see very wild spikes and troughts (as individual countries operated with their own agenda) that would make exploration and production a far greater gamble. Without some price predictablitly, who would invest the hundreds of millions necessary to go looking for new wells.
Without new production coming on line, the supplies would suffer and you'd see greater price fluctuations.
It's not like corn or wheat where you could sprinkle a different seed every few months to change your crops.
Look at the other side of the coin, prices spike and everyone wants Prius' and TCH's then a few months later, all manufacturers retool (cost in the billions) for efficient cars, only to see prices plummet when all the producing countries open the spigots to maximize revenues. Oil falls and then consumers ignore hybrids and want performance hogs.
Everyone loses.
You may not like them, but I think the world benefits from a relatively predictable price.
In this country, the government uses farm subsidies to help maintain a relatively stable (minimum) price for the commodity (that's on the record, off the record it's a bribe from the politicians for the farmer's votes). Were there no subsidies, farmer's would only plant seed where they thought the commodity was strong (for example, corn) and ignore weak commodities (for example, soybean). Then, when everyone shows up at market with tons of corn, prices plummet. In addition, since there is a lack of soybeans, the price soars. The next year, assuming any farmers are still in business due to this blunder, they all plant soybeans and ignore corn, and so on. You may not like violations of the free market, but price stabilization is not necessarily bad (in certain industries). In effect, OPEC is doing nothing different than Congress does with the farm bill.
I'd go as far as to say that the world's economy is better off with OPEC than without them.

 

So, Haroldo, what you are saying is that free markets actually are a bad idea? :^)

Actually, this is a complicated issue. But to Haroldo's original point, another interesting aspect is that, at a given level of economic activity, the demand for oil seems quite inelastic. Given the finite supply (and the distinct possibility that output will decline in the long run, say 5 - 10 years, no matter what), we could be in for more price spikes when the economy recovers.

All in all, I'm glad I have a hybrid!

Bill

 

Well, if he didn't say it, then I will. Yes, uncontrolled free market (dog eat dog, swim with the sharks, etc.) capitalism is a bad idea, as we've seen time and again with countless boom-bust cycles, in which people do get hurt. At the other extreme, hypermanaged planned economies like we saw in communist countries are also bad, as they lead to stagnation, inefficiency, and apathy. The answer appears to be the middle way, that is, to have a moderated free market, which allows business to thrive, but has some safety checks done by a third party (government, professional institution, whatever) to flatten the peaks and fill in the valleys. Hey, if someone had put the brakes on the housing speculation market a few years ago, they may have been cussed out, but we likely wouldn't be in the mess we are in today.

 

Another way to think of this... Every game must have rules and referees. If there are no rules, some people play rough, and other people get hurt, and then the game ends because no one is willing to play. If there are rules but no referees, or the referees are not willing to enforce the rules then some people cheat, and then the game ends because no one else is willing to play. The game we call "market" needs to be fair, with rules and referees, because without those things people get hurt and then no one is willing to play. We saw what happens, this year, when some players called "bankers" decided to take their marbles and go home.