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Gas Prices Are Hard To Explain

Remember when gas prices used to escalate by only one or two cents at a time? And that was newsworthy, even generated talk of a price war. Now the prices can escalate 10 cents a gallon from one day to the next, and it’s almost beginning to seem normal. To many Americans, that 10 cents adds up to real money fairly quickly.

It’s only February, and already we’re seeing gasoline prices get higher in preparation for summer’s increased driving when normally this is the time of year when gas prices drop. Right now gas is averaging $3.52 a gallon, compared to $3.12 in 2011. We doubt if very many people have seen their paychecks increase that much in just one year.

It’s rather difficult for most of us to make sense of this. According to the experts, demand for gasoline is down and the economy is poor, so the timing for this increase seems illogical. Most of us are not economists; we don’t have the expertise to figure out the back story but, whether it makes sense or not, we still have to pay for the gasoline to keep our cars running.

Gasoline prices have increased 83 percent since the beginning of 2009; at that time a gallon of gas cost $1.79. We wonder how many people’s incomes increased 83 percent in the last three years. If they didn’t, money is having to be juggled and people now have less money to spend on other things just so they can put gas in their cars.

And, regardless of what the experts tell us, other costs are going up as well.

Food prices rose 4.8 percent in 2011. The number of cattle in the United States is the same as it was in 1952, and there are certainly more people here than there were then. Since the law of supply and demand seems to be working in this case, beef and veal prices increased 10.2 percent last year. Eggs went up 9.2 percent and dairy products, 6.8 percent. There are plenty of more examples, but that seems to be a good explanation of why many people are finding they have less money at the end of the month than they did even a year ago.


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With these numbers in mind, the average person could easily question how “the experts” can tell us inflation is only about 3 percent. A lot more items are considered in coming up with the inflation rate, but just considering food and energy costs, prices have increased a lot more than 3 percent. One reason the government can tell us prices haven’t increased a lot is, for some strange reason, one index, the Personal Consumption Expenditure rate, doesn’t include food and energy costs in its determination of our consumption costs. Who knows why that decision was made since very few people can eliminate the cost of food and energy from their expenditures.

It would be convenient to say government findings don’t make much difference in our everyday lives. We decide how to spend our money, we buy houses, we find employment. But it does matter; employers decide how much to pay based on an expert’s determination of the cost of living, Social Security increases are based on those same numbers. It affects us more than we probably realize.

We are certainly looking at this simplistically. We are sure experts could poke a lot of holes in our arguments. We know the people in charge use a lot of sources other than just the Personal Consumption Expenditure index. However, we know— without a doubt — that gasoline is costing us a lot more than it did last year and that every time we go to the grocery store we see higher prices. It may not show up in all the fancy charts or reports, but it is costing us more to live than the inflation rate indicates and more than it ever has before.

Even if the experts have a logical explanation, we still find ourselves spending a lot more today than we did yesterday.

Common Sense appears on Saturdays. Contact the Ryans at