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Feathers and Rockets?

Posted By Don Boudreaux On August 5, 2008 @ 1:12 pm In Current Affairs,Energy,Prices | Comments Disabled

Here’s a letter that I sent a few days ago to the New York Post:

You favorably quote an analyst’s assertion that "motorists are getting
hosed" because prices at the pump have not fallen enough recently to
reflect the latest fall in oil prices ("Oil Drop Brings No Relief to
the Pump
," August 3).

Despite your seemingly supportive accompanying graph, this assertion is questionable.

First,
according to the figures in your own graph, oil prices today are 55
percent higher than in late September of 2007 (the starting date in
your graph), while gasoline prices today are 57.7 percent higher.  As
evidence of hosing goes, these figures are very weak indeed.

Second,
if we take a longer time horizon, evidence of hosing disappears
completely.  In 2004, for example, a gallon of gasoline retailed for
about $2.00 while a barrel of oil sold for about $33.  Today, oil’s
price is higher by 275 percent while gasoline’s price is higher by only
100 percent.

Sincerely,
Donald J. Boudreaux

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