In the early 1970’s gasoline in the United States was inexpensive, at about 35 cents per gallon. Today the price is $3.21 in my state, and more expensive in many other parts of the country. The world has changed, and the biggest change when it comes to petroleum is that oil-producing countries discovered their ability to manage global oil prices. The rest of us had to learn to live with it.
Oil producers’ power used to be thought of as scary, even a threat to the sovereignty of oil consumers, but perspectives have mellowed over time. Expensive fuel has caused nations to explore alternative energy sources, and improve the efficiency of motor vehicles. These are good things, no?
This is all to say, the dollar price of a gallon of gas is an illusion, because it fails to measure the actual costs of producing and burning it. Broader environmental and social costs are more difficult to measure and have been left out of the equation for a long time. Contrary to the dollar price trend, one might even argue burning a gallon of gasoline is cheaper today than the 70’s. You can drive farther on a gallon, and I’m guessing that technical innovation has even reduced the environmental impact (not by much though, let’s not get carried away).
Yes, the ACTUAL price of a gallon is much higher than its dollar price, because dollars fail to capture less measurable results. Dollars have been the measure of cost in the United States for a long time, mainly because it has been hard to measure the other kinds of costs for a long, time. People like it that way because it is simple.
They also like it that way because people and companies have not WANTED to know the actual costs. We have been happy to turn the other direction as scientific evidence has piled up.
To be fair the phenomenon of mis-measuring costs shows up in lots of different places, in different industries, and in different ways. In education for example, the low cost of considering ACT/SAT scores is attractive relative to the high cost of reading applicant essays, but the high cost of admitting one-dimensional students is difficult to measure so the practice continues. Similarly, in software development, the seemingly low cost of using no-code frameworks hides the cost of limited flexibility and bloatware for a long time. In human resources, keeping wages low has been an effective cost reduction tool, but measuring the cost of an employee leaving for a higher wage job is high–albeit, more difficult to measure.
The most obvious example of a misleading dollar cost is coal, the seemingly least expensive form of energy available, also one of the most damaging to the environment. Dollars fail to capture the actual cost of production and consumption, which can be measured in the form of hurricane damage, crop failures, and asthma among children. They are costs actually borne by actual people and actual companies. But they certainly are not reflected in the dollar price of coal.
At LOT we want people and families to be much more aware of the actual costs of their behaviors, and to act on them. HOW they act on them specifically is largely up to them, which is the topic of another post. But we all need to understand that the price we pay at the pump and the price we pay to cool our homes is but a shadow of their actual cost.
