Is Gas Actually a Bargain?

May 9, 2007 — -- Gas prices have once again hit a "record high," or so the media say. Lou Dobbs bemoans that gas is at its "highest price ever," and gripes, "What we're watching now is literally highway robbery."

National Public Radio reports on the "painful truth" of the recent spike in gas prices, while an Indianapolis Star reporter pines for "the good old days" when prices at the pump were low.

Drivers assume what they hear from reporters is true. I spoke with one woman who said that gas prices were "going up and up and up, and it's the most expensive it's ever been." And she was on a bike.

Read more about this myth, and many more, in the new paperback edition of "Myths, Lies, and Downright Stupidity."

But prices are not at a "record high."

The media say that gas prices are breaking records for one simple, simple-minded reason: They don't account for inflation. That makes the numbers look bigger than they are.

Such reporting is silly. Not adjusting for inflation would mean that the movie "Night at the Museum" outgrossed "Gone With the Wind."

It's not as if the reporters would have to work hard to figure this out. Not only are there instant inflation calculators on the Web, but the U.S. Department of Energy accounts for inflation in its annual report of gas prices.

As I write this, the department says the average price of gasoline in the United States is $3.05 per gallon. That's relatively high, but once you account for inflation, gas prices today are about the same as they were in the early 1920s. And they're lower than the record average set in March 1981, of $3.22 per gallon.

People don't get this perspective from scare-mongering reporters; one driver told me that gas prices are "scary."