Due to popular demand, I have created a new graph of real gasoline prices (adjusted for inflation) from 1949 to 2007 (using average annual data). That graph is located below:

As you can see, there is a gradual upward trend over the ~58 year period, with large price shocks around 1980 and 2005.  There are both short term and long term reasons for both shocks.  However, the upward trend that this graph’s trendline shows will begin to rise more rapidly for several long-term reasons.

First, the supply of petroleum is gradually decreasing, and when supply decreases, prices tend to rise.  Many oil experts have asserted that world oil production has passed Hubbert’s Peak, and the total supply of petroleum is in decline (Sources: 1 2 3 4).  Of course, this is up for debate, and many other experts claim that Hubbert’s Peak is faulty, and perhaps having multiple peaks, or is simply poorly derived (Source).  Regardless, there is a finite amount of petroleum on the planet, and as it becomes more scarce, total oil supply drops, because the “easy” sources of oil that were being used are gone, and now oil must be obtained through more difficult, and costly means (tar sands, etcetera).

Edit! I forgot to account for CPI changes over time to adjust for inflation. The new graphs now reflect that, making my results slightly less impressive but still the same effect. CPI data obtained from BLS. Thank you, user comments on Reddit.

Many people are claiming they are “confused” or “shocked” due to an increase in gasoline prices. Gas prices increases happen every year, and the unquestionable trend of gas prices is up. Very up. This shouldn’t be a shock.

I read a post today on the Environmental Economics Blog that included a graph of gasoline prices from 2004 to 2007. It was informative, and showed the usual summer spike in prices that we’ve seen for the past three years. But how about looking at the 17 year trend (from 1990) and checking for summer spikes and a long-run upward trend? I went ahead and did that (click the image to see full-sized):

I also created a graph with a trendline (quadratic), for extra emphasis:

From MSNBC:

In a 5-to-4 decision, the court rejected the administration’s argument that it had no legal authority to limit carbon dioxide released from new cars. In a ruling described as a landmark victory for environmental activists, it decided that the EPA does have such authority and that it must give better reasons for not using it than the “laundry list” of “impermissible considerations” it has offered until now.

We’ll see what happens…