Friday, March 08, 2013

Gasoline is way too high

So how do we know gasoline costs more than it should?  What does that mean anyway, "should".

Supposedly the price of everything is driven by demand and supply, but, that isn't really the way it works.  There are many ways to control the markets and falsifying demand is one of them.  People buy a lot of options on gasoline and this inflates the demand.  There is a process called "arbitrage" which describes how to make money buying options and selling a commodity or a stock.  If you want you can study how that works.  Maybe you can make some money and maybe you'll understand how the artificial demand created by options speculation is used to artificially manipulate markets.

To understand the price of gasoline over the last fifty years, or how ever many years you can get data for, we have to get some data.

This website gives us the average price of a gallon of gasoline for every year since 1971.

This gives us the median income and mean incomes for families of all races from 1953 to 2011.  This data is wacked, compare the mean income to the way I generated mean income numbers in my last blog.  We can use it anyway, just for fun.

Okay, take the data from the EIA website and enter it into your excel spread sheet from

Now we will create a simple ratio, how many gallons of gasoline will the average income buy?

So, looking at this simple chart we can see that gasoline is more than twice as expensive as it was in 2001 and almost three times as expensive as it was in 1998.

Gasoline is more expensive today than it has been in the past.  I have done this before, going back into the 1950s and the data looks even worse.  As we can see from this chart, since 2004 the price of gasoline is going way up.

This is not a demand issue.  This is a price manipulation issue.  I could get more into that, but, for now I will just point out that gasoline is expensive.

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