Gas is cheap these days.
<a href=www.heraldtribune.com>Gas prices are actually pretty good right now. It's been worse
The top 10 most expensive years to gas up and go (according to prices adjusted for inflation using the Bureau of Labor Statistics' Consumer Price Index):
Year Actual price Price in 2003 dollars
1981 $1.38 $2.47 1980 $1.24 $2.46 1982 $1.30 $2.19 1983 $1.24 $2.03 1979 $0.90 $2.03 1984 $1.21 $1.90 1949 $0.27 $1.88 1985 $1.20 $1.82 1950 $0.27 $1.81 1957 $0.31 $1.79
Sound crazy? Not when you take inflation into consideration.
Most people don't walk around calculating the effect of the Consumer Price Index on the price of milk, eggs and gas in the good old days. But if they did, they would find that the cost of filling up at the pump pales in comparison to the painful prices of the early 1980s and late '50s.
The Herald-Tribune took a look at gas and oil prices over the last half-century to better understand why the prices of oil and motor gasoline have been rising over the past few months and what effect the U.S. attack on Iraq might have.
In 1981, a gallon of regular unleaded gasoline for the family station wagon cost an average of $1.38 -- the equivalent of a whopping $2.47 in 2003 dollars, if the Consumer Price Index used by the Bureau of Labor Statistics is applied to adjust for inflation.
Back in 1949, as the United States was revving up for the post-war boom and the golden age of the automobile, a gallon of leaded gasoline cost about 27 cents. But in today's dollars, that trip to the corner gas station cost about $1.88 per gallon.
So why aren't motorists grateful for the measly $1.71 they were paying last week?
"People don't look at that," said Yoli Buss, director of traffic safety for AAA Auto Club South. "If you tell them that, they get mad at you."
In addition to the fact that motorists generally don't consider inflation, their frustration can be blamed on the sluggish economy and the particularly steep curve of this price increase.
Retail gas prices jumped from less than $1.40 per gallon just before Thanksgiving 2002 to $1.70 by early March. The 20 percent jump was compounded by rising unemployment and uncertainty about military conflict with a country that produces millions of barrels of oil every day.
As the nation's second war with Iraq unfolded last week, retail gas prices generally held steady, edging up by a few cents at the beginning of the week and hovering at around $1.70 to $1.72 per gallon of regular unleaded.
Despite reports that Saddam Hussein was torching Iraqi oil fields, crude oil prices steadily declined, dropping below the $30 mark for the first time since mid-December, according to the Energy Information Administration.
Spot prices for crude oil from West Texas Intermediate -- a company often used as a benchmark for tracking oil prices -- sank from $37.87 on March 13 (the week before the first strike by U.S. forces) to $28.62 per barrel by the end of the day Thursday.
Lessons from the past
When it comes to the effects that war with Iraq could have on oil and gas prices, at least analysts have something to go on.
The buildup to the Persian Gulf War pushed up oil and gas prices to levels similar to what refiners and motorists were paying last week as the country prepared for another war with Iraq.
In the spring of 1990, a barrel of crude oil from West Texas Intermediate was selling for $16 to $18, according to the Energy Information Administration.
By the end of August, the month Saddam Hussein invaded Kuwait and President George Bush called up the first round of U.S. reserves, a barrel was going for almost $30. In mid-October, the price briefly topped $40.
"What markets don't like (is uncertainty)," said Stephen Gengaro, managing director and senior equity research analyst for the oil services industry at Jefferies & Co. "Uncertainty is bad."
Crude oil prices had been skyrocketing for months as the United Nations and the U.S. Congress debated the use of force in what would be the Gulf War, but when U.S. forces launched their first strike, the price of a barrel of crude settled back in the $20s.
"When we don't know, we kind of extrapolate the worst case scenario," Chapman said.
On Jan. 16, 1991, West Texas Intermediate was selling a barrel of crude for about $32 (the equivalent of about $43 today).
That night, after the markets closed, the air war in the Persian Gulf began. The next day, the cost of a barrel dropped more than $10 to about $21 (about $28 in today's dollars).
Oil prices stayed in the low $20s and high teens through the ground war and the rest of the year, nudging into the mid-$20s around the time Iraq created massive oil slicks in the Gulf.
But even as smoke was rising from Kuwaiti oil fields in February 1991, oil held steady, topping out around $23 a barrel (about $31 in 2003 dollars).
As it turns out, fear is a greater motivating factor than war itself. Fear of a shortage of oil, and its refined products, drives up prices.
"It happens before," Buss, the AAA official, said about the tendency for prices to spike before military action. "After the fact, they find there is oil available and gas prices go down."
By early 1992, after the Gulf War, prices at the pump were hovering back around $1 -- about $1.30 in today's prices.
The length of the current war, as well as whether the United States could become a battleground, is the wild card this time.
Military conflict in the Middle East won't necessarily mean an automatic respite from the money Americans are shelling out to fill up. A quick resolution to the war and disarmament of Saddam could push prices down, but an extended battle could add to the uncertainty and the total charge at the pump.
Are we ready?
In 1990, the United States imported about 5.9 million barrels of crude oil per day. By 2002, it was taking in about 9 million barrels per day, according to the Energy Information Administration.
Imports represented about 42.8 percent of U.S. oil consumption in 1990, compared to 52.8 percent last year.
"The U.S. dependency on foreign oil is rising, not falling," Gengaro said.
Import ratios have changed, too.
Over the past decade, the country decreased its dependence on oil from Saudi Arabia and stepped up its reliance on imports from Mexico, Canada and Venezuela.
In 1990, the United States bought about 514,000 barrels of oil each day from Iraq, about 8.7 percent of its total imports. By 2002, that figure was only 4.9 percent, or 442,000 barrels.
But analysts are quick to point out that where the United States gets its oil doesn't have as much bearing on retail gas prices as the amount of oil available.
Because oil prices are determined based on worldwide availability and demand, a crisis in a country that supplies only a small amount of U.S. oil imports could have the same impact as an oil shortage in Saudi Arabia, where the United States gets about 20 percent of its foreign oil.
When a strike in Venezuela cut oil production in the South American country this winter, prices in the United States, which gets about 13 percent of its imports from Venezuela, went up.
It's difficult to define exactly how much the events in Venezuela influenced the price increase in the United States because the strike coincided with war fears and Hurricane Lili, which complicated the transport of oil in the Gulf of Mexico.
But the industry is still suffering from the hole the strike left in oil reserves.
"You're not talking about a whole lot of wiggle room," Gengaro said. "It's tight right now."
That could be bad news for pocketbooks and supplies if a war with Iraq slows production in the Middle East, as it did during the Gulf War.
With only the Gulf War as a reference point, refiners have made some business decisions that could come back to haunt them and their customers if the 2003 conflict lasts longer than the five-week 1991 incursion, analysts say.
Because the Gulf War was a "blowout," many refiners and industry insiders assume this war will be, too, said Richard DeKaser, chief economist at National City Corp.
"Those very expectations led to a different course of events," DeKaser said. "Because they thought it would be brief, they really didn't take proactive measures to beef up inventories."
When it came to feeding those reserves, buyers figured why purchase a barrel of oil for $30 or $35 today when you could buy it, presumably, for $20 to $25 later?
So unlike after the Gulf War, this time when prices do go down they may sink slowly.
"They will not fall like a stone," DeKaser said.