Another week has passed and unlike Wal-Mart’s falling prices, the cost of gasoline continues to rise. Metro-Phoenix’s area average cost for regular unleaded gasoline for the week ending March 8, 2012 was $3.876 – up 8.2 ¢ over the previous week. In Part 1 of this discussion, I shared that our pain at the pump is not news. Since oil is a commodity, and is subject to fluctuations in supply and demand in the market place, rising and falling gasoline prices have a long history in theUnited States.
Focusing on recent history, Figure 1 shows nominal and real prices of regular grade gasoline since 1976. The nominal price in blue is considered to be the price paid at the pump. A comparison is made to the “real” price, adjusted for inflation, so that past prices reflect “today’s” dollar value as of March 2012. [Source:U.S.Energy Information Administration (EIA)]
Figure 1: Short-term Energy Outlook, Real & Nominal Pricing for March 2012
Figure 1 provides a visual of the up and down movement of the cost of a gallon of unleaded regular gasoline. EIA reports that consumers paid the highest prices for gasoline in real terms in 1922, 1981, 1982, 2008, and 2011. Unlike old news,U.S.consumers have been discussing gasoline prices for years. It is currently being discussed by both political parties. Rather than crying about those escalating prices, why aren’t we, the citizens, demanding additional remedies to the problem other than lower gas prices?
Re-listening to President Carter’s Malaise Speech of July 1979, it was suggested that we address the energy problem with a war-footing. More specifically, Carter said, “The strength that we need to address our energy problems must not come from the White House, but every house. We can unite this nation around energy. We can win for our nation a new confidence.” Will this country’s struggle to manage rising gasoline prices from a non-renewable energy source go down a similar path like the one taken by theU.S. auto industry? I hope not although some might argue that we are already there.
The Big 3 auto makers recently reported their best profits in years. The last 10 years were a make-or-break proposition for Chrysler, Ford and General Motors. Interestingly, some, but not all of their problems were associated with low fuel efficiency and the rising cost of gasoline. New competitors from other countries likeJapan, thenKorea, and nowChinaandIndia, entered the global market. While the rest of the world was demanding economical vehicles with better fuel mileage,U.S.automakers continued to make bigger, more costly gas guzzlers. These decisions resulted in a loss of market share, competitiveness, brand image, and jobs.
U.S.consumers must demand energy security for our country. Will it take similar challenges and struggles like that of the U.S.auto industry before we can become an energy secure nation? I certainly hope not. We have met the enemy of rising gas prices. It is us. While we are figuring out what to do with us, today’s area average for regular unleaded gas in metro-Phoenix is $3.926.
References: AAA Fuel Price Finder