Back around 1960, my Dad bought an old Sinclair gas pump to fill his 1940s-vintage gas farm tractors. He never bothered to ever change the price on the pump, so it was always stuck at 28 cents a gallon. Wouldn’t that be nice? It certainly appears that gas is higher now than in “the good old days”. But compared to what?
Well, the prices are relative to the currency in which you buy gas – dollars, euros, etc. Historically gold represents the best available standard in terms of which to define the value of a monetary unit like a dollar. In 1960, 100 gallons of gas cost roughly the same (in dollars) as about .88 ounces of gold ($35.27). And in 2012, the 100 gallons are equivalent to about .23 ounces of gold ($1711.50).
So even though it takes many more dollars to buy a gallon of gas today than it did in 1960, it takes much less gold to do the same thing. It’s not gas prices going up so much as it is the dollar going down. Wages of many people aren’t going up as fast as the dollar is going down, so we all feel the pinch. If oil companies are bad guys for raising gas prices, those in charge of U.S. fiscal policy and deficit spending should shoulder part of the blame as well.