Fuel for Thought: The High Cost of Energy

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Snapshot for November 1, 2006.

By Max B. Sawicky

After exceeding $3.00 per gallon, gas prices fell this fall and many breathed easier. Lost in the relief, however, was the fact that prices are still well above relatively recent levels. Figure A shows prices of gasoline, diesel, and home heating oil since 1998, adjusted for inflation. Figure B shows prices for natural gas. All show large increases for 2006, compared to 1998: gasoline, up 75%; home heating oil, up 122%; diesel, up 96%; natural gas, up 166%.

Many families have seen little or no wage growth since 2001, so these fuel prices leave them in worse shape five years after the end of the recession.

Figure A. Petroleum product prices, 1998-2006

Figure B. Natural gas futures prices, 1998-2006 ($2006 per million BTU)

Notes: All prices are adjusted to 2006 dollars with the CPI-U. All energy data is from the Energy Information Administration. Gasoline is the "all grades all formulations retail" in dollars per gallon. Home heating oil is "U.S. No. 2 Heating Oil Residential Price," dollars per gallon. Diesel is "U.S. No. 2 Retail Sales by All Sellers," dollars per gallon. Natural gas is "Futures Contract 1," dollars per million BTU, prices for the last day of October, 1998-2006.

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