Tuesday, May 22, 2007



The above link should take you to a related intersting blog link that I found at the Knowledge Problem blog. We've all observed the tremendous increase in 'nominal' gas prices recently, and nominally they have reached an all time high. Adjusting for inflation, however, gas still is not as expensive as it was in the early 80's. If you look at the percentage of household income spent on transportation- miles traveled- ( a factor that even inflation adjustment does not account for) you will find that even for the lowest income earners, travel is still cheaper today than it was in 1981.

It is amazing what advances in technological progress and economic growth can do to cushion the effects of major problems. Although travel costs have not reached a historical peak, they may be on their way if increasing 'nominal' prices are any indication, and as I have said before, the problem deals mainly with the failure to increase refining capacity in over 30 years.

1 comment:

agEconomist said...

To quote from the Washington Times, the Energy Information Admininistration said "energy demand worldwide will soar 57 percent by 2030. To keep pace with that demand, production of oil would have to grow more than 40 percent to 118 million barrels a day."