Is Gas Actually a Bargain?

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."

What About Inflation?

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."

The cost of gas may be on the rise, but the situation is far from "scary." Gas prices spike every year around this time -- it's part of the high-demand summer season -- and prices are also higher because refineries have had trouble processing enough gas to meet demand. And of course, environmentalists have made it very difficult to build new refineries.

What Costs More: Gas or Water?

Alarmist reporters usually don't give a reasoned analysis of this passing problem; they just continue to headline "record high" gas prices.

By failing to account for inflation, the media have some Americans so alarmed that they can't seem to think straight.

"What costs more," I asked customers at a gas station, "gasoline or bottled water?"

The answer I got from almost everyone was gasoline.

At that very gas station, water was for sale at $1.29 for a 24-ounce bottle. That's $6.88 per gallon, three times what the station was charging for gasoline at the time.

It gets sillier. I asked gas station customers, "What costs more, gasoline or ice cream?" Again, most people said gasoline costs more. But at $3.39 a pint, "premium" ice cream costs about $27 a gallon.

We should marvel at how cheap gasoline is -- what a bargain we get from oil companies. After all, it's easy to package ice cream, but think about what it takes to produce and deliver gasoline. Oil has to be sucked out of the ground, sometimes from deep beneath an ocean.

To get to the oil, the drills often have to bend and dig sideways through as much as seven miles of earth. What they find then has to be delivered through long pipelines or shipped in monstrously expensive ships, then converted into three or more different formulas of gasoline and transported in trucks that cost more than $100,000 each.

Then your local gas station must spend a fortune on safety devices to make sure you don't blow yourself up. At $3.05 a gallon (about 46 cents of which goes to taxes), gas is a bargain!

But what we hear from the clueless media is: "Gas prices are at record highs!"