Higher gas prices are needed

Published by Bernie Niemeier

The U.S. inflation rate, which reached 8.6% in May, is at its highest point in 40 years. In 1982, it was just over 6%. Since then, the U.S. inflation rate has hovered mostly in the 2% to 4% range.

The inflation rate is determined by changes in the cost of a fixed basket of 80,000 goods and services that Americans use in their everyday lives. These include food and housing, furniture, medical costs, gasoline and other energy expenses. All are combined into a single measure, weighted on the basis of how much of each item a typical family consumes. Items are added and subtracted over time based on changes in consumption patterns. If that sounds complex, its because it is. For simplification, the one item most often referred to is the price of gasoline at the pump.

In 1982, the average U.S. cost per gallon of gasoline was just $1.22. For reference, the U.S. prime rate at that time was a whopping 13%.

Consumer gas prices remained relatively stable over the next 20 years, until they began a steady climb in the early 2000s, peaking at $4.14 per gallon in 2008 during the Great Recession. There was a steep drop in late 2008 to $1.75, followed by a gradual rise back to $3.96 in 2012 and then a steady decline to $1.87 in 2016. At the beginning of this year, gas prices started around $3.40. Theyve since risen sharply to a national average of $5.01, as of June 15, according to the American Automobile Association (AAA).

While it is tempting to thi....

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