Home Gas and Electricity

Every time we open the newspaper or turn on the news, we are reminded that we live in a global economy. The price paid at the fuel pump and grocery store is not only impacted by the current economic climate in the UK, it is also impacted by economies located on the other side of the world.

As an example, oil prices rose in Asia this week as the US dollar weakened. Therefore, it is important to look at the “global economy” as we compare gas prices from today with other economic times.

Factor in Supply and Demand as We Compare Gas Prices

When we compare gas prices, we need to factor in the current supply and demand of crude oil. Experts have indicated that we have reached “Peak Oil” production globally. “Peak Oil” occurs when half of the world’s oil reserves are depleted,

Although our oil supply is not going to disappear in the near future, prices will continue to rise as demand increases. The International Energy Agency (IEA) recently announced that world demand will be lower than expected in 2011; however, if China and Asia continue to demand more oil, reserves will be reduced and prices will definitely increase. With so many variables, it is very hard to predict where gasoline prices will end up. The past may give us a clue.

Compare Gas Prices Historically

To determine how today’s prices compare to prior years, we need to adjust the prices for inflation to do a true comparison. It appears that 1917 was the most expensive year, followed by 1956, 1975, 1981 and the year 2000. Gasoline prices stayed steady after that until 2008 when both unleaded and diesel took a dramatic price increase.

Fast Forward to Today

A recent report shows the UK has the second highest diesel price and the twelfth highest price for unleaded fuel in Europe. Both prices have fallen for the prior four months but are expected to increase with the expected fuel duty change.

Therefore, increases seemed to occur either because of wars or because of supply and demand issues, not necessarily due to economic downturns. It would be interesting to compare the median income with fuel prices historically and really see how far a pound goes today as compared to our parents and grandparents time.