Once again, there’s a news story saying that crude oil prices are at record highs (emphasis mine):
Oil prices rose above $93 a barrel to a new trading high in Asia Monday on growing political tensions in the Middle East, a weak dollar and worries about the supply outlook ahead of the winter.
“The strong price is due to supply concerns in general, on top of which we have the geopolitical news,” said Victor Shum, a Singapore-based energy analyst with Purvin & Gertz.
Light, sweet crude for December delivery rose as much as $1.34 to $93.20 a barrel, a new intraday record, in early afternoon Asian electronic trading on the New York Mercantile Exchange, before slipping back to $93.05.
That was still up $1.19 from Friday’s record close of $91.86 a barrel. The previous trading high was $92.22 a barrel, set Friday.
Already last week, I began wondering about these stories, but I focused in my post on prices at the gas pump. With a little help from my readers, I learned that, in terms of inflation adjusted relative dollar values, gas prices are definitely high, but they are not at record highs. Indeed, I’m willing to bet that, to the extent that more than 50% of every dollar I spend on gas goes to various state and federal taxes, what I’m actually paying for gas is substantially lower than comparable prices in previous decades.
Because of that tax factor (and I live in one of the highest gasoline tax states), it occurred to me that it would be more useful to analyze crude oil prices, because they’re fixed by the market, not by the government. And what I discovered is that, once again, the dollars are not really record highs. In a simplistic way, of course, they are record highs, because gas has never before had the number 93 affixed to each barrel. But, as I mentioned, that is simplistic, and represents the financial understanding of a grade schooler. As with gasoline, in real dollars, adjusted for inflation, we are not setting any records. To the contrary — we’re quite far away from the golden years of crude oil highs in the mid-1970s, and that despite a a war in the world’s oil producing region.
So, next time you’re at the gas station and feeling the pain at the pump, don’t think like a simple minded AP writer who is stuck on the dollar amount. Instead, congratulate yourself that you’re paying less for gas than we have at times past, and think about petitioning your government to lower those damn gas taxes.