I spoke with a coworker today about changes in prices over my lifetime. I remember at the tender age of 12 buying stamps for $0.19 and at the age of 16 buying gas for $0.85/gal. Since I like math, I wanted to see how these commodities compare.
Toward this end, I established a simple ratio coefficient to describe the price relationships. When I was 16, oil cost roughly $30/barrel, compared to $125/barrel today. If we run the numbers, you find an interesting correlation of proportionality.
Computing the ratios, we find the following:
1995: $30/$0.85=35.3
2008: $125/$3.65=34.3
The ratio relating the cost of a barrel of oil to the comparable cost of a gallon of gas, DECREASED in the last 13 years, and at a rate of 3% over that time period.
During that run of time, several outlying periods exist. Periods of supply interruption associated with rationing skew the data, so depending on from where you measure, the math yields different results. Over a longer period, however, the data normalizes to a trend, as you can see from the math, closely equating the rate of inflation.
As such, anyone who tells you gas companies like Chevron/Texaco and Exxon/Mobil are reaping windfall profits is selling something.
Toward this end, I established a simple ratio coefficient to describe the price relationships. When I was 16, oil cost roughly $30/barrel, compared to $125/barrel today. If we run the numbers, you find an interesting correlation of proportionality.
Computing the ratios, we find the following:
1995: $30/$0.85=35.3
2008: $125/$3.65=34.3
The ratio relating the cost of a barrel of oil to the comparable cost of a gallon of gas, DECREASED in the last 13 years, and at a rate of 3% over that time period.
During that run of time, several outlying periods exist. Periods of supply interruption associated with rationing skew the data, so depending on from where you measure, the math yields different results. Over a longer period, however, the data normalizes to a trend, as you can see from the math, closely equating the rate of inflation.
As such, anyone who tells you gas companies like Chevron/Texaco and Exxon/Mobil are reaping windfall profits is selling something.
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