The High Costs of Cheap Gas and Vice Versa

…Starting in the early 1990’s, Americans got to enjoy a decade of the lowest gasoline costs in the nation’s history. As Daniel Yergin, the author of a Pulitzer Prize-winning history of oil, says about those years, “Gasoline was truly one of the great bargains of the Western world.”

And, boy, did the country take full advantage. We fell in love with the high, comfortable ride of the sport utility vehicle without having to worry much about the gas bills, and we bought homes in distant exurbs like Sugar Grove, Ill., and Frederick, Md., that required long commutes to get just about anywhere.

Now, the good times seem to be over. The price of gasoline is hovering around $3 a gallon, and politicians are falling over each other to pander to voters’ gas fears. In a recent Gallup Poll, 70 percent of people said they favored price controls, a relic of Richard Nixon’s day.

But it’s time to take a deep breath and consider a radical fact: gas still isn’t all that expensive. I’m not just talking about the disparity between prices here and in Europe, where gas taxes are much higher. What really matters to people is the cost of the gas that is needed to drive a mile, a function of both the price of oil and the fuel efficiency of cars.

NY Times