News Release

April 8, 2004

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Cato expert: Despite hysteria, gas prices are not setting records

WASHINGTON--The national average price for of gas has climbed to $1.77 per gallon in the past few weeks, according to one survey. The news media report that gasoline prices today are higher than any other time in recorded history. However, Jerry Taylor, Cato's director of natural resources studies, says that in fact gasoline prices are relatively low by historic terms and warns against the growing hysteria.

Are we paying more for gasoline these days than ever before? Sure, says Taylor, but we are also paying more for homes, cars, groceries, baseball cards, and almost everything else than ever before. "Historical comparisons of prices over the years mean absolutely nothing unless we adjust for inflation," says Taylor.

"Politicians and the press are becoming unglued over the price of gasoline at the pump," he continues. "Despite all the hysteria, prices are NOT setting records - not even close. If we adjust gasoline prices for inflation and use 2003 dollars, we find that during the most celebrated days of cheap fuel and gas guzzling cars - 1955 - gasoline actually cost $1.66 a gallon on average across the nation. In 1972, the year before OPEC began to flex its muscles, prices were $1.28 a gallon. In 1981, the real record was set - $2.36 cents a gallon. Heck, prices are only a nickel higher now than at this time last year.

"Not adjusting prices for inflation when comparing prices now with prices then is to compare apples with oranges."