Wednesday, May 19, 2004

Gas is cheap!

The doom-and-gloomers are out in force again, and the latest reason the sky is falling is called "peak oil". It's nonsense, of course. As soon as there is some prospect of oil actually getting scarce, it will get more expensive and this will prompt subsitution. Higher prices send a message to everyone in the economy: use less, and find subsitute goods. Then we might see more power production using nuclear and coal and solar. What we won't see is massive die-offs and the end of civilization as we know it.

My guess is that the latest wave of hysteria is based on the non-event of prices at the gas pumps starting to exceed $2/gallon. But gas is still cheap by historical standards, much cheaper than it was in the 1980s. Adjusted for inflation, what we paid for gas in 1981 would be equivalent to $2.94/gallon today.

Here's a nice chart of inflation-adusted gas prices for the last few decades.

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